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QUESTIONS   OF    THE  DAY. 


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30— Th 

35 — Unwise  Laws.     By  LEWIS  H.  BLAIR.     Octavo,  cloth 

36 — Railway  Practice.     By  E.  PORTER  ALEXANDER.     Octavo,  cloth,  75 

37 — American   State   Constitutions :   A   Study   of  their  Growth.     By 
HENRY  HITCHCOCK,  LL.D.     Octavo,  cloth  ....        75 

38 — The    Inter-State  Commerce  Act :  An  Analysis  of  its  Provisions. 
By  JOHN  R.  Dos  PASSOS.     Octavo,  cloth        .         .         .         .     i  25 

39 — Federal  Taxation  and  State  Expenses ;  or,    An   Analysis   of  a 
County  Tax-List.     By  W.  H.  JONES.     Octavo,  cloth    .         .100 


QUESTIONS   OF   THE   DAY. 


40 — The  Margin  of  Profits.     By  EDWARD  ATKINSON.     Together  with 

the  Reply  of  E.  M.  CHAMBERLAIN,  Representing  the  Labor  Union, 

and  Mr.  Atkinson's  Rejoinder.  Cloth,  75  cents  ;  paper  .  .  40 
42 — Bodyke  :  A  Chapter  in  the  History  of  Irish  Landlordism.  By 

HENRY  NORMAN.  Octavo,  cloth,  illustrated  ...  75 
43— Slav  or  Saxon :  A  Study  of  the  Growth  and  Tendencies  of  Russian 

Civilization.  By  WM.  D.  FOULKE,  A.M.  Octavo,  cloth  .  I  oo 
44 — The  Present  Condition  of  Economic  Science,  and  the  Demand 

for  a  Radical  Change  in  its  Methods  and  Aims.     By  EDWARD 

C.  LUNT.     Octavo,  cloth        .......         75 

46 — Property  in  Land.  By  HENRY  WINX.  Octavo,  paper  .  25 
47— The  Tariff  History  of  the  United  States.  By  F.  W.  TAUSSIG. 

Octavo,  cloth .         .         .         .         .         .         .         .         .  i  25 

48 — The  President's  Message,  1887.  With  annotations  by  R.  R. 

BOWKER.     Octavo,  paper        .......         25 

49 — Essays  on  Practical  Politics.  By  THEODORE  ROOSEVELT. 

Octavo,  cloth 75 

50 — Friendly  Letters  to  American  Farmers  and  Others.  By  J.  S. 

MOORE.  Octavo,  paper 25 

52 — Tariff  Chats.  By  HENRY  J.  PHILPOTT.  Octavo,  paper  .  25 
53 — The  Tariff  and  its  Evils  ;  or,  Protection  which  does  not  Protect. 

By  JOHN  H.  ALLEN.  Octavo,  cloth  .  .  .  .  .100 
54 — Relation  of  the  Tariff  to  Wages.  By  DAVID  A.  WELLS.  Octavo, 

paper     ...........         20 

55 — True  or  False  Finance.  The  Issue  of  1888.  By  a  Tax- Payer. 

Octavo,  paper         .........         25 

56 — Outlines  of  a  New  Science.  By  E.  J.  DONNELL.  Octavo,  cloth, 

i  oo 
57 — The  Plantation  Negro  as  a  Freeman.  By  PHILIP  A.  BRUCE. 

Octavo,   cloth          .         .         .         .         .         .         .         .         .     I  25 

58 — Politics  as  a  Duty  and  as  a  Career,  By  MOORFIELD  STORY. 

Octavo,  paper         .         .         .         .         .  .         .         .         25 

59 — Monopolies  and  the  People.  By  CHAS.  W.  BAKER.  Octavo,  cloth. 

i  25 
60 — The  Public  Regulation  of  Railways.  By  W.  D.  DABXEY, 

Octavo    .         .         .         .         .         .         .         .         .         .         .125 

61 — Railway  Secrecy  and  Trusts;  Its  Relation  to  Inter-State  Legisla- 
tion.    By  JOHN  M.  BONHAM.     Octavo  .         .         .         .         .100 

62 — American  Farms  :  Their.  Condition  and  Future.  By  J.  R.  ELLIOTT. 

Octavo   ...........     i  25 


THE  WAR  OF  THE 
STANDARDS 

COIN  AND  CREDIT 

•versus 
COIN  WITHOUT  CREDIT 


BY 

ALBION  W.  TOURGEE 
t\ 

Author  of  "A  Fool's  Errand,"  etc. 


G.  P.  PUTNAM'S  SONS 

NEW   YORK  LONDON 

27  WEST  TWENTY-THIRD  STREET      ,  24  BEDFORD  STREET,  STRAND 

Ube  finfcfccrbocfccr  press 
1896 


COPYRIGHT,  1896 

BY 
ALBION  W.  TOURG^E 


"Rnicfcerbocfcer  Ipre0s,  mew  Jljorft 


CONTENTS. 


I. — THE    CURRENCY    ISSUE    OF    COMMANDING 

IMPORTANCE          .....       i 

II. — WHAT  is  THE  ISSUE  ? 10 

III. — AN  OLD,  OLD  STORY 18 

IV. — THE  WORLD'S  VERDICT      .  .     25 

V. — MONETARY  EXPERIMENTS    .         .         .         -36 

VI.— "THE  CRIME  (?)  OF    1873"  .     42 

VII. — DEPRECIATION  OF  SILVER    .         .         .         -49 

VIII. — A  NEW  ECONOMIC  LAW    , .        .        .        .     56 

IX. — THE  DECLINE  OF  PRICES     .        .        .        -63 

X.— "  VALUE,"     "  EQUIVALENCY,"     "  MONEY," 

"  CREDIT  " 73 

XI. — NATIONAL     CURRENCY     AND     NATIONAL 

CREDIT 82 

XII. — TERMINAL  LEGAL-TENDER  CREDIT-MONEY.     98 

XIII. — THE  RESULTS  OF  FREE  COINAGE  OF  SILVER.  105 

XIV. — CURRENCY  AND  PROTECTION      .        .        .118 

XV. — THE  RICH  AND  THE  POOR  .  126 


ill 

250581 


THE 

WAR  OF  THE  STANDARDS 

COIN  AND  CREDIT 

versus 
COIN   WITHOUT  CREDIT. 


I. 


THE    CURRENCY    ISSUE    OF    COMMANDING    IMPOR- 
TANCE. 

WITH  the  advance  of  civilization  the  interdependence 
of  man  upon  his  fellows,  both  individually  and  collec- 
tively, comes  to  be  a  matter  of  constantly-increasing  im- 
portance. The  closer  lives  approach  to  other  lives  the 
greater  the  opportunity  both  for  conscious  and  uncon- 
scious good  and  evil. 

Exchange  is  the  greatest  of  all  the  means  by  which  soci- 
ety exercises  its  mighty  power  over  the  individual.  The 
man  who  neither  buys  nor  sells  has  little  power,  and  is 
subject  to  few  influences.  The  more  a  man  sells  or  buys 
the  more  dependent  he  becomes  on  others.  Civiliza- 
tion multiplies  his  wants,  his  desires,  his  interests,  his 
opportunities.  Every  need  opens  a  door  by  which 


2  THE  CURRENCY  ISSUE. 

another  enters  into  his  life.  Every  time  he  buys  or 
sells,  the  o'ther  party  to  the  transaction  does  some- 
thing to  condition  his  life,  and  is  in  turn  the  recipi- 
ent of  influence  from  him.  The  instrument  by  which 
this  influence  is  chiefly  exerted  is  currency  ;  since  by 
this  the  greater  part  of  all  exchange  is  effected.  If  a 
man  has  to  buy  what  he  eats,  what  he  wears,  what  he 
occupies,  what  he  uses,  what  he  enjoys,  then  money 
becomes  to  him  as  the  breath  of  life  to  his  nostrils. 

To  the  savage  and  the  "  hobo,"  who  live  on  what 
nature  supplies  or  man  gives,  money  is  of  little  con- 
sequence. But  to  him  who  gives  something  for  every- 
thing he  receives,  who  pays  for  whatever  he  has,  by 
giving  something  in  exchange,  money  is  the  most  im- 
portant thing  in  life,  because  it  represents  all  that 
supports,  adorns,  and  makes  life  enjoyable  to  the  in- 
dividual or  useful  to  others. 

Civilization,  through  the  contiguity  of  man  with  man 
which  it  compels,  not  only  conditions  life  with  the  dollar- 
mark,  but  makes  a  thousand  things  which  were  without 
price,  attainable  only  by  the  payment  of  money.  To 
primitive  life  the  sun  furnishes  light,  the  streams  and 
springs  water.  The  forest  and  the  desert  need  no 
roads,  man's  own  limbs  furnish  locomotion.  Civilized 
society  requires  roads,  streets,  cars,  lights,  a  water  sup- 
ply, railroads,  telegraphs,  telephones — and  for  all  these 
some  one  must  pay.  Society  supplies  the  greater  por- 
tion of  them,  but  the  individual  must  pay  society  for  the 
privilege  of  using  and  enjoying  them.  Toll  is  levied  at 


THE  CURRENCY   ISSUE.  3 

every  turn  of  the  path  of  civilized  life.  The  physician 
demands  a  fee  at  the  entrance  gate  ;  the  teacher  at  the 
door  of  the  school-house  ;  the  minister  at  the  marriage 
altar  ;  the  undertaker  at  the  grave.  All  that  we  eat,  all 
that  we  wear,  nearly  all  that  we  drink,  must  be  paid  for. 
A  price  is  set  upon  half  that  we  see,  upon  the  streets  we 
walk,  and  the  means  of  transit  and  communication  we 
use.  There  is  a  price-mark  on  every  necessity  of  life, 
every  luxury,  and  every  privilege.  The  law,  the  courts, 
the  police,  the  government  that  secures  them  to  us — all 
these  cost  money  ;  for  all  of  them  society  must  pay  and 
the  individuals  who  compose  society  must  reimburse  it 
for  the  outlay.  The  dollar  is  the  foundation-stone  of 
civilization.  Salvation  may  be  free,  but  a  price  is  set 
on  all  the  means  of  grace — the  church,  its  priests,  its 
altars,  all  its  agencies.  Even  the  "  Salvation  Army  "  and 
the  deeds  of  charity  which  good  men  and  women  do  for 
their  fellows — for  all  of  these  some  one  must  pay.  Man 
is  no  longer  saved  by  faith  alone,  for  money  is  required 
to  make  faith  effectual.  Cash  is  essential  to  make  the 
doctor's  prescription  available,  the  lawyer's  advice  of  any 
value,  and  to  give  effect  to  the  prayer  of  faith.  We  say 
the  air  is  free,  but  there  is  no  place  in  all  the  civilized 
world  where  it  can  be  breathed  without  somebody  pay- 
ing, in  some  way,  for  the  privilege. 

Is  it  any  wonder  that  every  one  should  have  an  inter- 
est in  that  which  measures  all  need,  grants  all  privilege, 
opens  every  gate  of  opportunity,  gives  effect  to  aspira- 
tion, and  is  the  condition  of  all  enjoyment  and  usefulness? 


4  THE  CURRENCY  ISSUE. 

The  character  and  efficiency  of  the  currency,  which  is 
the  medium  by  which  all  exchange  is  effected,  is  the 
most  vital  and  universal  question  that  can  be  presented 
to  civilized  man,  because  it  colors  and  conditions  every 
moment  of  his  life.  Production  is  a  matter  of  vast  im- 
portance ;  commerce  a  thing  of  absorbing  interest.  The 
conditions  that  affect  labor  and  its  employment  are  of 
the  highest  interest  to  all,  because  labor  is  the  chief  ele- 
ment, both  of  production  and  of  commerce  ;  but  the 
character  and  efficiency  of  the  currency  is  of  pre-emi- 
nent importance  to  each  and  every  one,  because  it  is  the 
universal  measure  both  of  production  and  of  consump- 
tion— of  labor,  use,  and  enjoyment.  No  other  social  or 
political  question,  save  only  liberty,  can  approximate  it 
in  importance  ;  and  only  religion  and  love  can  exceed  it 
in  influence  on  human  destiny.  To  touch  it  is  to  touch 
the  life  of  every  man,  woman,  and  child  in  a  civilized 
community. 

Because  the  currency  measures  all  material  things  that 
enter  into  the  universal  life,  it  is  easy  to  perceive  the 
truth  of  the  seeming  paradox,  that  he  who  has  the  least 
of  it  is  most  concerned  as  to  its  character  and  quality. 

The  man  who  handles  little  money  consumes  his 
whole  store  every  day.  It  measures  his  daily  bread,  his 
health,  his  strength,  his  leisure,  his  happiness,  his  value  to 
himself,  to  his  family,  and  to  society.  If  we  reduce  the 
purchasing  power  of  the  money  he  receives,  which  is 
now  just  sufficient  for  his  needs,  he  must  do  without 
just  that  much  of  what  is  essential  to  his  vitality  and 


THE  CURRENCY  ISSUE.  5 

value.  Take  away  ten  per  cent,  of  the  purchasing  power 
of  the  currency  and  you  take  away  ten  per  cent,  of 
the  manhood  and  womanhood  of  half  the  people  of 
the  United  States,  and  increase  thereby  the  burden  of 
poverty,  crime,  and  vice.  The  man  who  suffers  want  is 
thereby  the  more  inclined  to  be  a  criminal.  The  woman 
that  cannot  earn  a  livelihood  honestly  has  the  greater 
temptation  to  obtain  a  dishonest  one.  So  the  currency 
question  is  one  of  morals  as  well  as  comfort  and  happi- 
ness, to  those  who  have  only  enough.  To  the  man 
who  has  more  than  enough  for  to-day,  the  quality  of 
the  currency  is  a  matter  of  less  moment,  since  its  lack 
of  purchasing  power  affects  only  his  surplus.  To  the 
man  who  has  great  wealth,  it  is  a  matter  of  compara- 
tively little  consequence ;  since  at  most  it  only  re- 
duces his  superfluity.  Ten  per  cent,  shrinkage  only 
takes  a  dime  off  the  laborer's  daily  wage  ;  but  that  means 
a  loaf  out  of  his  daily  bread.  From  the  man  who  has  a 
million  dollars  it  would  take  away  a  hundred  thousand 
dollars  ;  but  he  would  have  nine  hundred  thousand  left 
— more  than  he  can  consume  or  even  use,  except  for 
mere  gratification  of  his  desires.  What  then  is  the  ratio 
between  the  interest  which  the  poor  man  has  in  the 
quality  of  the  currency,  and  the  rich  man's  interest  in  it  ? 
What  comparison  shall  adequately  express  it  ?  It  is  as 
the  diamond  to  the  dust  on  the  jewel-cutter's  tool.  A 
yard  cut  from  a  roll  of  ribbon  is  a  trifle  ;  an  inch  taken 
from  a  man's  collar  means  suffocation. 

But  it  is  claimed  that  if  the  purchasing  power  of  the 


6  THE  CURRENCY   ISSUE. 

present  currency  should  be  reduced  by  the  free  coin- 
age of  silver,  say  one-tenth  or  even  one-half,  the 
man  who  has  now  but  little  money,  who  day  by  day  con- 
sumes his  daily  wage,  will  get  a  great  deal  more,  and  so 
be  enabled  to  buy  perhaps  two  or  three  times  as  much 
of  the  things  he  needs. 

This  is  a  fair  proposition  and  a  plain  one.  It  means 
an  exchange  of  less  for  more.  If  it  is  a  correct  hy- 
pothesis, everybody  should  favor  the  change.  Even  if  it 
would  give  to  the  poor  man  more  and  to  the  rich  man 
less  of  purchasing  power  than  he  now  controls,  everybody 
ought  to  favor  it.  The  rich  man  could  afford  to  be  not 
quite  so  rich  in  order  to  see  all  his  poor  neighbors  more 
abundantly  provided  with  the  necessaries  of  life  and  its 
most  important  comforts.  There  may  be  millionaires 
who  would  rather  hold  all  they  have  than  lose  a  tenth  in 
order  to  improve  the  general  condition  one  fifth  or  even 
one  half ;  but  it  is  not  probable  there  are  many  such. 
Men  may  not  be  willing  to  give  much  to  charity,  be- 
cause they  say  to  themselves  :  **  What  I  may  give  will 
go  but  a  little  way  "  ;  but  there  are  very  few  men  who 
are  even  moderately  rich,  who  would  not  be  willing  to 
see  their  superfluity  greatly  lessened  in  order  to  in- 
crease in  like  ratio  the  ability  of  all  those  who  have 
not  enough. 

In  like  manner,  there  are  men  no  doubt  who  have 
barely  enough  to  live,  who  would  be  willing  to  lose  a 
part  of  this  in  order  to  see  the  rich  stripped  of  their 
superfluity.  Envy  is  just  as  base  a  sentiment  as  greed. 


THE  CURRENCY  ISSUE.  7 

Neither  is  a  good  criterion  of  individual  or  public  duty, 
and  neither  constitutes  the  general  impulse  of  any  mod- 
ern community.  The  average  civilized  man  likes  to  see 
others  prosper  as  well  as  prosper  himself.  The  swine  is 
not  the  true  emblem  of  Christian  civilization. 

So,  if  the  proposed  change  will  increase  the  ability  of 
those  who  have  not  enough  to  acquire  needful  comforts, 
though  it  should  not  proportionately  increase  the  super- 
fluity of  those  who  have  more  than  enough,  or  even  if 
it  should  increase  the  ability  of  the  poor  to  gain  creature 
comforts  and  not  enhance  the  superfluity  of  the  rich  at 
all,  rich  and  poor  alike  ought  to  heartily  favor  the  change. 
And  no  doubt  a  vast  majority  of  both  classes  would,  if 
they  could  only  be  made  sure  of  such  result  or  even  of 
its  reasonable  probability.  The  claim  of  the  advocates 
of  the  free  coinage  of  silver  is  that  it  will  do  at  least  one 
of  these  things.  If  it  will  they  ought  to  win.  But  sup- 
pose it  should  not,  and  instead  of  enabling  the  man  who 
is  now  able  to  get  barely  enough,  to  earn  more,  it  should 
reduce  both  his  sufficiency  and  the  rich  man's  super- 
fluity— or  reduce  the  present  ability  of  the  man  who 
with  difficulty  gets  enough  without  impairing  the  super- 
abundance of  the  rich,  what  then  ?  A  rich  man  can  afford 
to  gamble.  He  stakes  only  his  superfluity  against  the 
chance  of  greater  gain.  But  when  the  poor  man  gam- 
bles he  stakes  his  manhood,  his  strength,  the  happiness 
of  his  wife  and  the  hope  of  his  children.  If  he  loses, 
he  has  lost  that  which  is  beyond  price. 

The  currency  issue  of  to-day  is  simply  this  ; 


8  THE  CURRENCY  ISSUE. 

The  advocates  of  the  unrestricted  coinage  of  silver 
claim  that  the  adoption  of  that  policy  at  this  time  by  the 
United  States,  would  better  the  conditions  of  those  who 
are  now  able  with  difficulty  to  gain  enough  to  supply 
their  need,  because  it  would  greatly  increase  the  cur- 
rency without  impairing  the  relative  equivalency  of  its 
individual  units. 

The  Republican  Party  reply  to  this  proposal  to  change 
the  existing  monetary  conditions,  that  such  increase  of 
the  amount  of  the  currency  at  this  time  would  greatly 
reduce  the  purchasing  power  of  all  silver  coin,  both  that 
already  issued  and  that  which  might  be  coined  hereafter, 
and  that  the  risk  of  such  result  is  so  great  that  this 
nation  should  only  venture  to  make  such  a  momentous 
monetary  experiment  with  the  co-operation  of  the  other 
civilized  commercial  nations  of  the  world. 

The  American  people  are  to  decide  which  of  these 
contrasted  policies  it  is  better  for  the  greatest  nation  of 
the  world  to  pursue.  If  the  claim  of  those  who  favor 
free  coinage  of  silver  be  true  and  reliable,  that  policy  is 
the  most  beneficent  and  desirable  ever  proposed  to  any 
government  or  any  people.  If  it  is  not,  it  is  one  of 
the  most  perilous  and  delusive  ever  suggested. 

Having  such  immeasurable  responsibility  resting  upon 
them,  it  is  fit  and  fortunate  that  the  people  are  giving  to 
this  question  such  deep,  earnest,  and  universal  atten- 
tion. Instead  of  deprecating  its  discussion  or  visiting 
those  who  advocate  either  view  with  reprehension  or  de- 
nunciation, it  should  be  regarded  as  the  most  hopeful 


THE  CURRENCY  ISSUE.  9 

sign  of  our  civilization,  the  certain  evidence  that  another 
great  step  has  been  taken  toward  the  establishment  and 
perfection  of  "A  government  of  the  people,  by  the 
people,  and  for  the  people." 

Hard  words  are  soft  arguments.  Passion  is  a  poor 
guide.  The  sober  thought  of  an  intelligent  people  can 
be  trusted  to  decide  more  wisely  than  biassed  theorists  or 
heated  partisans.  The  destinies  of  the  republic  are  not 
decided  by  the  government  at  Washington,  but  by  free 
parliaments  which  gather  in  the  field,  the  shop,  the 
school-house,  and  by  the  fireside.  It  is  only  when  the 
people  grow  apathetic  that  the  Republic  is  in  peril. 

Whatever  may  be  the  result  of  this  great  "  Battle  of 
the  Standards "  now  pending,  one  thing  is  sure — the 
world  will  be  better  for  its  being  fought  out  by  the 
"  heart,  brain,  and  conscience  of  the  American  people," 
in  discharge  of  the  great  function  of  self-government 
which  rests  equally  with  all,  rich  and  poor,  high  and  low. 


IL 

WHAT  IS  THE   ISSUE? 

THE  story  is  told  of  a  noted  English  judge,  that  he 
was  wont  to  assure  the  jury  in  all  cases  of  difficulty  that 
when  they  had  once  clearly  determined  what  the  ques- 
tions were  which  they  had  to  decide,  their  work  would 
be  at  least  half  done. 

This  principle  is  especially  applicable  to  the  duty 
which  at  this  time  devolves  on  the  American  people. 
At  first  glance  the  issue  seems  simplicity  itself,  but  like 
that  of  guilty  or  not  guilty,  it  is  found  on  examination  to 
depend  on  the  prior  determination  of  a  great  variety  of 
curiously  obscure  and  complicated  theories.  Yet  there 
is  no  reason  why  a  man  of  ordinary  capacity  should  not 
determine  for  himself  the  essential  questions  and  arrive 
at  an  intelligent  conclusion  on  the  merits  of  the  issue 
presented. 

At  first  glance  one  is  struck  by  the  apparent  simplicity 
of  the  proposed  policy  of  free  coinage  of  silver,  the  ruin 
which  attended  its  revocation  and  the  dazzling  magnif- 
icence of  the  results  which  are  to  flow  from  its  restora- 
tion. There  are  not  really  many  facts  involved,  and 
there  is  little,  if  any,  controversy  in  regard  to  them.  The 

10 


WHAT  IS  THE  ISSUE?  II 

times  are  hard;  have  been  for  years.  We  are  a  producing 
people — the  greatest  producing  people  in  the  world,  both 
in  extent  and  variety  of  products.  Prices  are  low — lower 
than  they  have  ever  been  in  our  country's  history.  Corn, 
wheat,  all  kinds  of  cereals  ;  cattle,  horses,  cotton,  iron, 
steel — everything — or  almost  everything  that  is  raised  on 
the  farm  or  made  in  the  shop  has  been  marked  down  and 
down  until  even  the  purchaser  marvels  at  the  cheapness 
of  what  he  buys.  The  wages  of  labor  are  not  only 
greatly  reduced,  but  opportunity  for  employment  is 
greatly  restricted.  Capital  is  timid  ;  enterprise  is 
paralyzed.  Even  the  hope  of  better  times  seems  to 
have  little  to  rest  upon.  Yet  there  was  never  so  much 
wealth,  never  so  much  luxury,  never  so  much  capital 
lying  idle,  never  so  much  debt,  never  so  much  abun- 
dance, yet  never  so  many  out  of  work  ;  never  so  much 
difficulty  to  procure  ordinary  comforts  ;  never  so  many 
idle  men. 

All  this  is  true  by  every  one's  observation  and  ex- 
perience. 

What  is  the  cause  of  these  conditions  ?  This  is  the 
universal,  the  inevitable  inquiry.  No  man  can  help 
asking  it.  It  is  an  intuitive  expression  of  wonder  in- 
spired by  unexpected,  if  not  unparalleled,  conditions. 
The  advocate  of  free  coinage  answers  promptly  :  "  The 
demonetization  of  silver.  "  "  When  did  that  occur  ? " 
"  In  1873."  "  Sure  enough,"  the  inquirer  reflects,  "  and 
there  came  a  big  '  panic '  just  afterwards,  and  things 
have  been  going  on  from  bad  to  worse  ever  since.  But 


12  WHAT  IS  THE  ISSUE? 

how,"  he  asks,  "  did  this  demonetization  of  silver  come 
to  have  such  a  wonderful  effect  ?  " 

The  answer  comes  with  fluent  confidence  :  "  It  re- 
duced the  volume  of  the  currency  ;  increased  the  pur- 
chasing power  of  gold ;  and  so  lowered  the  price  of 
everything  which  is  bought  and  sold." 

"  How  can  these  conditions  be  remedied  ? "  By  repeal- 
ing the  "  crime  of  1873" — by  re-monetizing  silver,  thereby 
increasing  the  volume  of  currency,  restoring  silver  to 
its  "  god-ordained  use  as  a  coin  metal,"  making  money 
abundant,  business  lively,  prices  high,  and  the  demand 
for  labor  greater  than  ever  before. 

It  is  a  dazzling  contrast,  and  so  simple  and  easy  to  be 
effected  !  We  have  only  to  coin  silver  night  and  day,  as 
the  world  brings  it  to  our  mints  and  the  miners  dig  it 
out  of  the  ground.  There  is  an  amazing  store  of  it 
waiting  to  be  made  into  round  white  plasters  which  are 
to  bring  balm  to  the  world's  woes  !  One  wonders  if  the 
prosperity  which  is  promised  will  be  at  all  proportionate 
with  the  superabundance  of  the  remedy.  It  seems  rea- 
sonable that  it  should  be,  and  one  can  only  hope  it  might. 
But  as  to  this,  no  prophet  gives  assurance.  We  know 
there  must  be  an  immense  amount  of  the  redeeming 
metal  waiting  transmutation  into  coin.  There  has  been 
little  coined  in  twenty-five  years  except  those  365,000,000 
silver  dollars  which  persist  in  lying  idle  in  the  vaults  of 
the  Treasury  at  Washington,  instead  of  flowing  forth  to 
heal  the  nations  in  spite  of  "  the  government  stamp  " 
upon  them.  During  this  time,  the  product  has  averaged 


WHAT  IS  THE  ISSUE?  13 

$150,000,000  a  year.  The  mints  of  Europe  have  been 
practically  closed  for  twenty  years.  With  the  old  stock, 
which  other  nations  are  waiting  to  let  us  have, — 
Germany  alone  has  $400,000,000  of  depreciated  coin  to 
dispose  of — there  must  be  not  far  from  $1,000,000,000  of 
silver  waiting  to  have  its  purchasing  power  expanded 
one  half  by  the  impress  of  our  mint-mark  with  the  boast- 
ful legend  "  In  God  we  trust."  Practically,  this  claim 
of  the  advocates  of  free  coinage  means  that  the  wealth 
of  the  world  will  be  at  once  increased  more  than  a  bil- 
lion dollars  by  the  simple  coinage  of  what  is  now  in 
sight.  If  the  theory  be  a  true  one,  there  was  never 
anything  like  it  for  beneficent  results.  But  IS  it  true  ? 
There  is  the  rub.  And  if  it  be  not  true,  what  would  the 
consequences  be  ?  There  lies  the  danger. 

Because  of  this  doubt,  it  becomes  necessary  to  con- 
sider the  nature  of  money  and  recall  something  of  its 
history  in  order  to  judge  what  the  probabilities  may  be 
that  the  result  promised  will  be  secured. 

As  has  been  said,  the  facts  in  the  case  are  not  many, 
and  most  of  them  are  substantially  agreed  upon.  It  is 
only  the  consequences  claimed  to  result  from  these  facts 
which  are  affected  with  doubt.  Let  us  see  in  what  there 
is  agreement,  and  then  we  shall  more  easily  define  the 
doubt.  It  is  agreed  that  the  advocates  of  free  coinage 
of  silver,  are  right  in  the  following  facts  on  which  they 
base  their  conclusions  : 

The  silver  dollar  was  the  original  standard  of  equiva- 
lency in  the  United  States. 


14  WHAT  IS  THE  ISSUE? 

Gold  was  afterwards  made  a  co-ordinate  standard  of 
the  ratio  of  sixteen  parts  of  coined  silver  as  equivalent 
to  one  of  coined  gold. 

At  the  time  the  California  gold  fields  were  opened, 
1849,  silver  was  worth  more  than  this  ratio  in  the  market. 

The  commercial  value  of  silver  continued  to  be  above 
its  coin-value  in  the  United  States  until  after  1873. 

The  annual  production  of  gold  during  this  interval 
1849,  to  1873,  exceeded  in  value  that  of  silver. 

The  commercial  value  of  silver  fell  below  the  coin- 
value  in  France  and  most  of  the  continental  nations  of 
Europe  before  1870  ;  the  ratio  in  these  countries  being 
one  to  fifteen  and  one  half  ;  that  is,  less  silver  is  there — 
required  as  a  coin-equivalent  for  gold  than  with  us. 

Gold  has  not  fallen  in  value  since  1849  5  it  may  even 
have  appreciated. 

The  prices  of  nearly  all  commodities  have  fallen  since 
1873,  but  there  are  certain  noteworthy  exceptions. 

The  price  of  commodities  had  been  falling  from  1865 
to  1873. 

The  price  of  most  commodities,  whether  natural  prod- 
ucts or  manufactured  articles,  is  perhaps  lower  now 
than  at  any  period  in  the  world's  history. 

Supply  and  demand  are  the  chief  regulators  of  prices 
for  all  commodities.  If  there  is  a  short  supply,  prices 
range  high  ;  if  an  abundant  supply,  prices  are  low. 

In  1873  the  United  States  stopped  coming  silver  on 
private  account. 

Nearly  all  of  the  nations  of  Europe  had  restricted  the 


WHAT  IS  THE  ISSUE?  1 5 

coinage  of  silver  before  that  time,  or  had  initiated  move- 
ments looking  to  its  restriction. 

With  these  facts  admitted,  we  have  to  consider  the 
questions  on  which  the  validity  of  the  claims  of  the 
advocates  of  free  coinage  of  silver  rest,  to  wit : 

Did  the  restriction  of  the  coinage  of  silver  on  private 
account  by  the  United  States  in  1873  cause  the  deprecia- 
tion of  silver  ? 

Did  the  adoption  of  the  gold  dollar  of  twenty-five  and 
four-fifths  grains  fine  gold  as  the  standard  of  equivalency 
by  the  United  States  in  1873  cause  the  depreciation  of 
silver  ? 

Did  the  establishment  of  the  gold  standard  of  equiva- 
lency, or  the  repeal  of  the  law  permitting  coinage  of 
silver  on  private  account  by  the  United  States,  or  both 
of  them,  cause  the  decline  in  prices  since  that  time  ? 

Will  the  free  coinage  of  silver  cause  silver  to  appre- 
ciate ? 

Will  the  free  coinage  of  silver  cause  the  prices  of  com- 
modities to  rise  ? 

Does  an  increase  in  the  currency  ever  cause  a  general 
advance  in  the  price  of  commodities  ? 

Is  \\.  possible  that  the  value  of  silver  and  the  price  of 
commodities  should  BOTH  be  enhanced  by  free  coinage 
of  silver? 

Even  granting  that  the  restriction  of  silver  coinage  in 
1873  was  a  "  crime,"  is  it  at  all  certain  that  its  repeal 
would  be  a  cure  ? 

If  it  should  happen  that  the  results  of  free  coinage 


l6  WHAT  IS   THE  ISSUE? 

should  not  be  what  its  advocates  anticipate,  but  on  the 
contrary  should  be  a  debased  currency  and  still  further 
depression  in  all  lines  of  production  and  trade,  how  long 
will  it  take  the  country  to  recover,  and  what  would  be 
the  cost  of  restoring  our  currency  ? 

Cannot  our  currency  be  increased  to  any  extent  that 
may  be  desirable,  without  any  of  the  risk  attending  free- 
coinage,  without  disturbing  the  present  standard,  at  a 
great  reduction  of  the  public  interest-charge,  without 
any  of  the  present  difficulty  arising  from  the  use  of  our 
credit-currency  to  draw  gold  from  the  treasury,  and 
without  modification  of  the  present  standard  ? 

Even  if  the  best  currency,  abstractly  considered, 
should  be  gold  and  silver  coined  without  restriction,  at 
a  ratio  of  sixteen  to  one,  might  not  occasions  arise  which 
would  make  it  ruinous  to  a  country's  prosperity,  to  adopt 
such  a  currency,  and  are  not  the  existing  conditions  of 
our  currency  and  our  finances  such  as  to  constitute  the 
present  such  an  occasion  ? 

These  are  questions  which  every  man  must  answer, 
before  he  can  intelligently  determine  which  side  he  will 
take  in  the  present  "  battle  of  the  standards."  As  will 
be  seen,  they  are  mostly  questions  depending  upon  pres- 
ent conditions  rather  than  upon  historic  theories.  They 
are  not  difficult  to  answer,  if,  instead  of  trying  to  guess 
financial  conundrums,  one  will  devote  his  attention  to 
the  consideration  of  well-known  facts. 

In  considering  these  questions,  we  shall  endeavor  to 
avoid  immaterial  detail  and  the  discussion  of  abstract 


WHAT  IS  THE  ISSUE?  I/ 

theories,  however  interesting  they  may  be,  unless  of 
absolute  importance  to  the  questions  in  issue,  the  pur- 
pose being  to  present  the  subject  clearly  to  every  reader 
whether  he  be  a  technical  expert  in  the  minor  details  of 
monetary  theories  or  not. 


III. 


AN  OLD,   OLD   STORY. 

THE  "  battle  of  the  standards "  is  no  new  thing. 
Caesar  took  part  in  one  of  its  skirmishes  and  Coper- 
nicus wrote  a  book  about  it  before  he  formulated  his 
theory  of  the  solar  system.  Those  who  wrote  about  it 
until  the  middle  of  the  eighteenth  century  were  mostly 
priests  and  philosophers.  Then  the  French  school  of 
social  writers,  with  some  great  financiers  of  the  time, 
took  it  up.  Toward  the  last  of  that  century,  Adam 
Smith,  Ricardo,  and  other  great  thinkers,  considered  it, 
generally,  as  a  part  of  some  work  on  political  economy 
of  which  it  is  a  necessary  branch.  Since  1870,  when  the 
demonetization  of  silver  in  the  continental  nations  of 
Europe  was  first  considered  as  a  practical  question,  the 
flood  of  works  which  have  flowed  from  the  presses  of 
England,  Germany,  France,  and  the  United  States  upon 
this  subject  has  been  enormous.  All  sorts  of  people 
have  written  upon  it,  but  especially  college  professors, 
bankers  or  professional  financiers  and  social  and  politi- 
cal reformers.  A  curious  thing  about  it  is  that  very 
few  lawyers  have  contributed  to  the  volume  of  this 
literature.  Perhaps  the  reason  for  this  may  be  found  in 

18 


AN  OLD,   OLD   STORY.  19 

the  indefinite  and  conflicting  character  of  speculation 
upon  the  subject,  as,  indeed,  upon  all  branches  of  what 
is  termed  the  "  science  "  of  political  economy. 

The  defects  of  nearly  all  the  works  upon  the  subject 
— defects  common  to  all  branches  of  politico-economic 
speculation — have  been  :  (i)  An  apparently  irresistible 
inclination  to  formulate  a  universal  system  of  monetary 
philosophy  applicable  to  all  times  and  conditions,  na- 
tions and  peoples.  (2)  A  like  tendency,  especially  on 
the  part  of  social  reformers,  to  devise  monetary 
systems  which  shall  harmonize  with  some  pet  theory 
and  wrest  the  work  of  other  writers  on  the  subject  to 
support  their  peculiar  views  ;  the  object  of  most  of  this 
class  of  writers  being  not  to  perfect  the  existing  mone- 
tary system,  but  to  devise  one  that  may  support  and 
strengthen  some  peculiar  social  theory. 

Except  in  metaphysical  philosophy,  there  has  never 
been  anything  like  the  same  amount  of  theorizing  with 
such  a  notable  paucity  of  facts.  Almost  every  writer's 
purpose  seems  to  have  been  to  demolish  some  other 
writer's  theory.  Some  of  the  works  have  been  wonder- 
fully astute  studies  of  particular  topics,  and  the  tendency 
is  a  growing  one  in  that  direction.  A  very  large  pro- 
portion of  them,  however,  are  concerned  with  the  same 
old  problem — how  to  arrive  at  and  maintain  a  correct  and 
stable  relation  between  two  coin-metals,  which  arose  in 
the  earliest  times  from  the  apparent  insufficiency  in  the 
supply  of  a  single  metal  to  serve  as  the  sole  medium  of 
exchange.  At  that  time,  credit-money  had  not  been 


2O  AN   OLD,   OLD  STORY. 

devised,  and  coin  and  private  credit  were  the  only  agencies 
of  exchange.  Consequently,  neither  silver  nor  gold  was 
deemed  sufficient  alone  to  meet  the  demands  of  trade. 
So  the  battle  of  the  standards  began.  Reduced  to  its 
simplest  terms,  it  is  an  inquiry  as  to  how  two  things,  each 
of  constantly  varying  value,  can  be  kept  at  a  stable  ratio 
of  equivalency  to  each  other.  This  problem  has  occu- 
pied the  minds  of  men  just  about  as  long  as  the  study 
of  perpetual  motion.  Like  that  queer  problem  of  me- 
chanics, it  has  attracted  some  of  the  best  minds  of  every 
succeeding  age,  and  is  to-day  just  about  as  near  solution. 
For  several  years  the  writer  pursued  the  study  of  this 
subject  with  undiminished  ardor,  expecting  always  to 
find  somewhere  set  forth  a  universal  science  of  national 
finance  to  which  all  monetary  questions  might  be  re- 
ferred for  final  and  infallible  decision.  At  the  end  of 
that  time,  he  reached  the  conclusion  that  such  a  science 
is  just  as  impossible  of  formulation  as  a  universal  science 
of  business  methods.  One  man  pursues  one  method 
and  succeeds  ;  another  its  opposite  and  succeeds.  One 
man  makes  a  fortune  by  operating  railroads  ;  another  by 
wrecking  them.  The  same  man  pursues  one  method  at 
one  time  and  succeeds ;  the  same  method  at  another 
time  and  fails.  At  one  time,  it  is  sound  policy  or  a  grim 
necessity  for  him  to  pay  twenty,  fifty,  or  even  a  hundred 
per  cent,  interest  ;  at  another,  he  would  be  a  fool  to  bor- 
row at  ten.  To-day,  it  is  sound  policy  for  him  to  buy 
at  the  highest  rate  ;  to-morrow  equally  to  his  interest  to 
sell  at  half  what  property  may  have  cost  him.  In  other 


AN  OLD,   OLD  STORY.  2 1 

words,  business  methods  must  depend  on  the  man,  the 
conditions  and  opportunities  he  meets,  and  the  character 
of  those  with  whom  he  deals. 

In  like  manner,  national  financial  policy  and  monetary 
methods  must  depend  on  the  genius  of  the  people,  the 
financial  condition  of  the  nation,  the  credit  and  re- 
sources of  that  particular  country  at  any  special  juncture 
of  its  affairs.  In  other  words,  the  monetary  system  of 
every  nation  should  be  adapted  to  promote  its  prosperity. 

Thus  the  monetary  methods  of  the  United  States  dur- 
ing the  War  of  the  Rebellion  were,  in  many  respects, 
such  as  to  make  the  hair  of  the  professional  financier  or 
money  theorist  stand  up  with  horror  in  their  contempla- 
tion. But  they  were  fitted  to  the  genius  of  the  people 
and  the  conditions  of  the  times,  and  were  unquestionably 
the  best  that  could  have  been  devised.  They  were  not, 
as  some  have  claimed,  exceptions  to  a  general  rule,  but 
applications  of  the  one  sole  universal  rule  :  Monetary 
methods  and  financial  policies  must  be  adapted  to  existing 
conditions. 

Impressed  by  this  view,  the  author  has  formulated 
some  brief  maxims,  which  may  be  found  helpful  to  one 
studying  some  of  the  current  literature  on  this  subject  : 

A  preconceived  theory  is  the  worst  kind  of  a  torch  to 
guide  the  footsteps  of  an  inquirer  after  truth. 

The  fact  that  a  man  is  a  successful  banker  or  great 
capitalist  no  more  constitutes  him  a  reliable  authority 
as  to  what  constitutes  the  most  desirable  currency  for  a 
country  to  adopt  at  a  particular  juncture,  than  skill  with 


22  AN  OLD,  OLD   STORY. 

the  rifle  constitutes  the  marksman  an  authority  on 
the  science  of  projectiles  or  the  composition  of  gun- 
powder. 

The  reformer  who  regards  currency  as  merely  a  means 
for  effecting  some  ulterior  social  or  economic  result, 
and,  therefore,  proposes  a  currency  which  shall  be  good 
enough  to  pay  debts  and  poor  enough  to  draw  the  teeth 
of  avarice,  may  be  a  very  good  man,  but  is  not  likely  to 
arrive  at  safe  conclusions  on  practical  questions. 

Money  is  an  instrument  of  human  invention  susceptible 
of  constant  improvement  but  subject  to  no  natural  law, 
except  the  law  of  human  nature  and  the  limitations  of 
supply  and  demand. 

The  improvement  of  this  instrument  of  trade  in  the 
past  has  been  as  pronounced  as  the  development  of  any 
material  art,  and  has  arisen  from  the  stress  of  public 
need  rather  than  elaboration  of  pre-existing  theory.  Its 
perfection  has  been  delayed  by  the  conditions  which 
have  prevented  the  application  of  the  inventive  faculty 
to  the  elaboration  of  its  mechanism. 

Sound  judgment,  applied  to  a  clear  comprehension  of 
existing  financial  conditions,  is  the  only  thing  that  can 
be  safely  relied  on  to  solve  the  present  problem.  This 
is  quite  as  apt  to  be  found  in  the  man  who  walks  the 
furrow  as  in  one  who  discounts  bills. 

The  force  of  "authority"  in  monetary  science  is 
greatly  impaired  by  a  general  tendency  to  make  the 
Almighty  responsible  for  pet  projects.  The  truth  is 
that  God  has  nothing  more  to  do  with  money  than  with 


AN  OLD,   OLD   STORY.  23 

bicycles.  He  furnishes  the  raw  material  and  the  man 
who  makes  and  uses  both — and  that  is  all. 

It  may  not  be  polite  to  look  a  gift-horse  in  the  mouth; 
but  when  one  makes  his  fellow-citizens  a  present  of  a 
new  political  theory,  it  becomes  their  duty  as  trustees 
for  each  other's  welfare,  to  examine  its  teeth  before 
exchanging  old  methods  for  it. 

The  more  positive  a  man's  assertions,  the  more  anx- 
ious one  should  be  to  examine  his  premises. 

A  man  who  proposes  to  jump  over  a  precipice  should 
be  sure  there  is  some  way  of  getting  back  ;  and  one  who 
advocates  a  policy  should  consider  what  would  be  the 
result  if  his  prognostications  chance  to  fail.  A  safe  and 
sure  remedy  should  always  be  preferred  to  a  doubtful 
and  dangerous  one. 

These  may  be  commonplace  truths  ;  but  if  one  is  go- 
ing to  try  to  find  his  way  through  the  maze  of  assertion, 
theory,  assumption,  and  whimsicality  which  constitutes 
the  great  mass  of  speculation  in  regard  to  "  value," 
"  wealth,"  and  the  relations  of  collective  power  to  indi- 
vidual conditions  put  forth  in  the  present  campaign,  he 
will  need  to  strengthen  his  sense  of  personal  responsi- 
bility for  the  result  very  often,  by  recurring  to  them. 
There  is  nothing  so  contagious  as  reiterated  error. 
When  a  specious  falsehood  is  closely  tagged  to  a  self- 
evident  truth,  it  is  very  hard  to  separate  them.  Moham- 
med understood  this  fundamental  principle  of  human 
nature  and  linked  with  the  universal  truth,  "  God  is 
God,"  the  specious  non-sequitur,  "  and  Mahomet  is  his 


24  THE  OLD,   OLD   STORY. 

prophet."  In  social  and  economic  speculation,  a  little 
bit  of  known  truth  is  often  made  to  float  an  immense 
amount  of  untested  theory. 

In  the  following  pages  the  writer  has  endeavored  to 
confine  himself  to  the  discussion  of  a  single  question  : 
"  What  is  the  best  monetary  policy  for  the  United  States 
to  adopt  at  this  time  ? " 


IV. 

THE  WORLD'S  VERDICT. 

IN  attempting  to  answer  this  question,  it  is  a  matter  of 
importance  that  we  keep  always  in  mind  the  fact  that 
money  is  a  purely  human  invention.  Fortunately  for  the 
reverence  due  to  him,  the  Almighty  has  nothing  to  do 
with  the  form,  character,  composition,  value  or  efficiency 
of  any  kind  of  money.  The  utmost  that  can  be  said,  is 
that  He  created  the  substances  to  which  the  function  of 
money  has  been  attached  by  various  human  devices. 
That  is,  He  made  the  shells  which  men  polished  or  per- 
forated and  used  for  currency  ;  the  materials  out  of 
which  wampum  was  woven  ;  the  skins  which  passed 
current  when  fairly  dressed,  the  metal  which  a  legal 
unit-mark  transmutes  into  coin  ;  the  raw  materials  of 
the  paper  on  which  the  promise  which  constitutes  credit- 
money  is  impressed. 

*'  God  made  bees,  bees  made  honey ; 
God  made  man,  man  made  money," 

is  an  old  saw  which  tells  the  whole  story  of  the  divine 
relation  to  both  products.  The  bee's  instinct  for  a  sac- 
charine diet  impelled  him  to  gather  and  store  honey. 
Man's  inclination  to  better  his  condition  by  trade  with 

25 


26  THE  WORLD'S  VERDICT. 

his  neighbor  induced  him  to  devise  an  instrument  to 
facilitate  exchange.  The  bee  having  only  a  limited  in- 
telligence contents  itself  with  one  sort  of  cell-formation, 
and  as  soon  as  it  finds  it  unnecessary,  by  reason  of  milder 
climate,  to  store  honey  for  winter  use,  he  quits  work 
entirely.  The  more  a  man  gets,  however,  the  more  he 
wants  ;  and  when  he  finds  one  form  of  money  cumber- 
some or  insufficient  for  his  needs,  he  devises  another. 

It  is  much  the  same  relation  that  the  migratory  im- 
pulse in  man  sustains  to  the  improvement  of  the  means 
of  marine  propulsion.  A  savage  struggling  to  keep  afloat 
in  some  forgotten  flood,  seized  on  a  log  and  was  borne 
down  with  the  current.  After  a  while,  he  burnt  out  one 
side  of  the  log  and  had  a  canoe.  Another  stuck  up  a 
leafy  branch  and  made  a  sail ;  another  invented  a  pad- 
dle, another  an  oar.  The  canoe,  in  time,  became  a  boat ; 
the  boat  a  ship.  Masts  and  yards  were  provided,  a  rud- 
der was  added.  After  thousands  of  years  the  compass 
came  to  give  eyes  to  the  winged  caravel,  and  the  log  to 
measure  its  speed.  After  some  centuries  more,  a  man 
harnessed  steam  to  a  great  cumbrous,  unscientific,  yet 
wonder-working  side- wheel  propeller  and  bade  defiance 
to  wind  and  tide.  Twenty-five  years  after,  so  swift  had 
come  to  be  the  march  of  invention,  a  screw-propeller 
was  tucked  under  the  stern  and  did  the  work  of  the  side- 
wheels  much  better  and  with  less  risk  of  disablement. 
Sails,  oars,  paddles,  and  side-wheels  are  still  in  use,  but 
the  screw-propeller  is  the  type  of  excellence.  Who  shall 
say  that  to-morrow  may  not  show  a  much  better  form  of 


THE  WORLD'S  VERDICT.  27 

marine  propeller  ?  It  is  hardly  to  be  doubted  that  it 
will  soon  come.  What  would  be  said  of  a  mariner  or 
philosopher  who  should  clamorously  assert  that  the  pad- 
dle, the  oar,  or  the  sail  were  the  only  "  natural,"  "  god- 
ordained,"  "  safe  and  reliable  "  means  of  traversing  river 
and  ocean  ?  Simply  that  they  were  too  crazy  to  be  out 
of  bedlam  or  too  stupid  to  know  what  they  were  talking 
about. 

The  improvement  in  the  form  and  character  of  money 
has  not  been  so  marked  as  of  the  means  of  marine  pro- 
pulsion, nor  has  it  reached  a  scientific  perfection  at  all 
comparable  with  that  of  the  screw-propeller.  Indeed, 
it  may  be  doubted  if  it  has  reached  a  stage  of  efficiency 
equivalent  to  that  of  the  side-wheeler  in  marine  archi- 
tecture. There  are  good  and  sufficient  reasons  for  this 
slowness  of  development  and  imperfection  of  results. 
A  monetary  system  can  only  be  improved  through  the 
action  of  a  sovereign  power,  and  the  sovereign,  whether 
individual  or  popular,  is  always  hard  to  move  forward. 
The  marine  architect  needs  no  legislative  permit  to 
try  his  experiments  ;  the  man  who  seeks  to  improve  the 
instrument  of  exchange  must  convince  a  king  or  a  coun- 
try that  what  has  been  is  not  perfection,  and  that  what  he 
suggests  is  an  improvement.  Collective  progress  is  al- 
ways away  behind  individual  development.  Our  govern- 
ments, state  and  national,  were  urged  to  take  control  of 
the  telegraph.  For  a  mere  trifle,  fifty  years  ago,  the 
nation  might  have  secured  those  inventions  which  are 
the  foundation  of  the  great  telegraph  monopoly  of  to- 


28  THE  WORLD'S  VERDICT. 

day.  Now  the  wires  are  stronger  than  the  government, 
and  it  is  likely  to  require  as  many  more  years  to  enable 
it  to  break  the  coil  of  the  python  which  sucks  the  blood 
of  the  people.  Governments  move  slowly  because  indi- 
viduals have  to  go  ahead  and  drag  them  forward.  It  is 
for  this  reason  that  improvements  in  the  monetary  sys- 
tem of  a  country  are  never  made  except  from  stress  of 
public  loss  or  disaffection.  When  a  monetary  idea  has 
been  quite  worn  out,  or  a  king  or  country  is  in  such 
straits  that  something  must  be  done,  the  statesman  turns 
his  attention  for  a  time  to  improving  the  currency.  The 
ratchet  is  loosed  a  cog  or  two,  and  then  locked  up  until 
another  "  monetary  crisis  "  kicks  it  loose  again.  Honest 
coin  of  uniform  weight  and  standard  fineness,  credit- 
money,  bank-bills,  legal-tender  promises, — these  and 
other  improvements  in  the  instrument  of  exchange  which 
we  call  money,  are  all  the  result  of  popular  disaffection 
with  existing  monetary  conditions. 

Another  reason  why  progress  in  this  direction  has 
been  slow,  is  the  fact  that  until  recent  times,  the  monarch 
and  the  money-lender  were  the  persons  whose  interest 
was  chiefly  considered  in  all  matters  affecting  the  money 
of  the  realm.  The  monarch  debased  the  currency  at 
his  need,  or  paid  the  money-lender  in  concessions  of 
privilege,  which  enabled  him  not  only  to  recoup  his  loan, 
but  secured  to  him  profits  which  the  people  had  to  pay. 
To  this  we  are  indebted  for  many  of  the  most  vicious 
principles  of  finance,  among  others  the  theory  of  constant 
redeemability  as  the  sole  basis  of  credit-currency. 


THE  WORLDS  VERDICT.  29 

Still  another  reason,  which  should  by  no  means  be  over- 
looked, is  the  inherent  conservatism  of  wealth.  Not  only 
the  large  capitalist,  but  the  man  of  moderate  means  looks 
with  a  just  and  reasonable  suspicion  upon  changes  in  the 
circulating  medium.  Mere  unfounded  apprehension  of 
change  sometimes  crystallizes  into  invincible  opposition, 
and  there  are  instances  in  monetary  history,  in  which  at- 
tempts to  introduce  a  better  currency  have  been  baffled 
by  this  sentiment.  There  is  no  doubt  that  much  of  the 
popular  revulsion  against  the  gold  standard  in  1878  was 
based  on  this  feeling,  rather  than  any  special  conviction 
that  the  "  dollar  of  the  fathers  "  would  give  us  a  better 
currency.  The  same  sentiment  showed  itself  in  con- 
tinental Europe,  and  was  reflected  in  the  monetary 
congresses  of  the  next  few  years. 

Despite  these  influences,  experiments  intended  to  in- 
crease the  volume  of  the  currency  have  been  not  in- 
frequent in  civilized  countries.  The  great  majority  of 
them  have  been  more  or  less  successful  attempts  to  use 
banking-credit  regulated  by  law,  to  supplement  some 
coinage  system,  the  object  being  in  almost  every  case 
both  to  increase  the  circulating  medium  and  enable  the 
bank  to  make  a  profit  by  the  fiction  of  issues  constantly 
redeemable  in  coin.  The  record  of  the  failures,  panics, 
and  disasters  which  have  resulted  should  be  sufficient  to 
convince  any  one  of  the  folly,  if  not  the  wickedness,  of 
this  inherently  absurd  theory,  and  should  long  ago  have 
compelled  its  abandonment  and  the  substitution  of  some 
more  philosophical  and  less  perilous  method  of  supple- 


30  THE  WORLD'S  VERDICT. 

menting  a  nation's  coinage.  It  seems  to  have  a  peculiar 
charm,  however,  for  the  speculative  intellect  and  the 
most  noted  writers  on  financial  questions  still  insist  that  a 
method  depending  wholly  on  chance  and  the  skill  of  the 
banker  is  the  only  secure  foundation  for  a  credit-cur- 
rency. 

Of  the  other  experiments  which  have  been  made  by 
the  nations  of  the  world,  having  for  their  purpose  the 
improvement  of  credit-currency,  there  are  but  three  that 
are  worthy  of  note  at  this  time  :  (i)  The  grant  of  legal- 
tender  quality  to  the  notes  of  the  Bank  of  England,  the 
Bank  of  France,  and  other  national  European  banks  ; 
(2)  The  issue  of  non-interest  bearing  legal-tender 
demand-notes  by  the  government  of  the  United  States  in 
1862  and  their  maintenance  as  an  important  part  of  the 
currency  until  the  present  time.  (3)  The  establishment 
of  our  system  of  National  Banks,  whose  issues  are  based 
entirely  on  the  credit  of  the  government,  represented  by 
bonds  deposited  to  secure  circulation  and  redeemable  in 
legal  money  of  the  United  States. 

These  are  important  and  instructive  steps  towards  the 
improvement  of  credit-currency  as  an  adjunct  of  the 
coinage  systems  of  these  countries. 

As  to  the  experiments  in  coinage,  it  may  be  said 
broadly,  that  every  country  of  the  world  has  at  some  time 
in  its  history  taken  a  turn  at  the  problem  of  discovering 
the  proper  ratio  of  equivalency  between  gold  and  silver, 
and  then  trying  to  keep  such  ratio  stable.  All  of  these 
experiments  may  be  classed  under  the  following  heads  : 


THE  WORLD'S  VERDICT.  31 

i. — The  attempt  to  maintain  a  stable  equivalency  by 
the  use  of  both  gold  and  silver  as  coin  metals  of  equal 
dignity  and  unrestricted  coinage  at  some  fixed  ratio  of 
equivalency.  This  experiment  may  be  said  to  have 
been  tried  by  every  nation  of  the  world  and  been  aban- 
doned as  hopeless  by  nearly  all,  practically,  by  all. 
England  abandoned  it  in  1816  ;  France,  Italy,  Switzer- 
land, Greece,  Belgium,  Austria,  Germany,  the  United 
States,  Portugal,  Brazil,  Chili,  Egypt,  Norway,  Sweden, 
Denmark,  during  the  past  quarter  of  a  century,  that  is, 
at  various  times  since  1870. 

2. — The  countries  named  above  having  abandoned  un- 
restricted coinage  of  both  metals  at  a  fixed  ratio  of 
equivalency,  have  entered  upon  the  experiment  of  an 
unlimited  coinage  of  gold,  which  is  made  the  standard 
of  equivalency,  with  a  restricted  coinage  of  silver  at  a 
fixed  ratio  of  equivalency,  not  uniform  in  all  of  them, 
being  sixteen  to  one  in  the  United  States,  fifteen  and  a 
half  to  one  in  most  of  the  others  and  fourteen  and  one- 
fourth  to  one  in  Great  Britain.  This  experiment  differs 
in  one  important  respect,  in  different  countries.  In  the 
United  States,  France,  and  most  of  the  continental  coun- 
tries in  Europe,  except  Germany,  the  experiment  is  being 
tried,  of  a  restricted  silver  coinage  being  maintained,  with 
full  legal-tender  power  ;  that  is,  making  it  a  legal-tender 
for  all  debts,  no  matter  what  their  amount. 

In  England,  Germany,  and  perhaps  Austria,  the  ex- 
periment is  being  tried  of  limiting  the  legal-tender  power 
of  the  restricted  silver  coinage,  that  is,  making  silver  coin 


32  THE  WORLD'S  VERDICT. 

a  legal-tender  only  for  limited  amounts  ;  in  England  the 
limit  is  forty  shillings.  For  any  less  amount,  silver  is 
a  legal-tender.  This  has  been  the  English  monetary 
system,  substantially,  since  1816.  In  other  words,  she 
has  tried  this  experimeut  for  eighty  years. 

3. — In  all  the  countries  above  named  with  an  infinite 
variety  of  difference  in  method,  the  coinage  has  been 
supplemented  by  some  system  of  legal-tender  credit- 
money,  issued  either  by  the  government  directly,  or  by 
some  banking  institution,  to  which  the  privilege  has  been 
granted  as  a  profitable  concession. 

4. — In  all  of  them  the  experiment  has  been  tried,  of 
keeping  their  legal-tender  credit-money  at  par  with  the 
standard  equivalency  by  the  application  of  the  monetary 
theory  of  "  constant  redeemability  "  ;  that  is,  the  legal- 
tender  credit-money  is  said  to  be  at  all  times  redeemable 
in  coin  of  full  legal-tender  quality. 

5. — Certain  other  countries  which  have  also  abandoned 
the  experiment  of  unrestricted  coinage  of  two  metals 
of  equal  dignity,  at  a  fixed  ratio,  have  attempted  to  solve 
the  problem  of  the  stability  of  coin-equivalency,  by 
abandoning  gold  as  a  coin-metal,  that  is,  by  demonetiz- 
ing gold  and  retaining  silver  as  the  only  legal-tender 
coin.  These  countries  are  Mexico,  British  India,  Cen- 
tral America,  Bolivia,  Columbia,  Ecuador,  Peru,  and 
Venezuela.  Russia  is  preparing  to  adopt  the  gold  stand- 
ard. Japan  and  China  are,  practically,  on  a  silver  basis. 

6. — Certain  other  countries  are  still  continuing  the  ex- 
periment of  a  double  or  bi-metallic  standard  of  equiva- 


THE  WORLD'S  VERDICT.  33 

lency.     These   are  :     The  Argentine   Republic,  Hayti, 
The  Netherlands,  Spain,  Servia,  and  Turkey. 

These  are  termed  experiments,  because  all  things  are 
experimental  which  are  subject  to  change  or  modification. 
They  are  all  attempts  made  by  various  nations  to 
determine  the  monetary  system  best  adapted  to  the 
peculiar  conditions  of  each,  and  are  entitled  to  consid- 
eration and  respect  as  such.  Their  value,  as  analogies 
or  arguments,  in  the  pending  controversy  in  the  United 
States,  is  to  be  estimated  by  our  knowledge  of  the  social, 
financial,  and  economic  conditions  of  each  of  these 
nations.  Fortunately,  every  person  of  ordinary  intelli- 
gence is  able  to  apply  this  test  with  more  or  less  accuracy 
and  determine  for  himself  which  is  more  likely  to  afford 
a  safe  example  for  us  to  follow  at  this  time,  and  it  needs 
but  a  single  glance  at  the  lists  above  given  to  show  that 
every  nation  of  any  commercial  or  political  importance 
in  the  world  has  abandoned  after  fair  and  prolonged  trial 
the  attempt  to  maintain  a  stable  equivalency  by  the 
unrestricted  coinage  of  two  precious  metals.  The  more 
intelligent  and  prosperous  have  adopted  the  single  gold 
standard  with  a  restricted  silver  coinage.  The  class  of 
nations  next  in  consequence  have  adopted  silver  as  the 
standard  of  equivalency,  either  wholly  demonetizing 
gold  or  forcing  it  into  the  condition  of  a  commodity. 
There  are  still  some  men  of  very  high  intellectual  char- 
acter who  insist  on  what  is  termed  the  double  or  bi- 
metallic standard  as  both  practical  and  desirable,  just 
as  there  are  still  men  who  believe  in  perpetual  motion. 

3 


34  THE  WORLD'S  VERDICT. 

So  far  as  national  experience  goes,  however,  it  has  de- 
cided overwhelmingly  in  favor  of  a  mono-metallic  stand- 
ard of  equivalency. 

The  advocates  of  the  unrestricted  coinage  of  silver 
seek  to  break  the  force  of  this  world-verdict  against 
their  theory,  by  asserting  that  the  other  nations  of  the 
world  have  been  forced  to  this  position  by  the  predom- 
inating power  of  British  capital.  The  claim,  if  worth 
considering  at  all,  is  greatly  weakened  by  the  fact  that 
the  three  nations  most  hostile  to  British  interests  and 
most  jealous  of  British  influences,  France,  Germany,  and 
the  United  States,  have  only  given  over  the  double 
standard  theory  during  the  past  twenty-five  years.  The 
writer  confesses  himself  an  Anglophobist  of  the  rankest 
sort,  but  he  sees  no  reason  for  running  counter  to  all  the 
world's  experience,  simply  because  some  one  chooses  to 
point  to  the  result  and  say  :  "  See  what  England  has 
done ! "  The  fact  that  England  has  adhered  to  the 
gold  standard  for  so  many  years  is  simply  the  testimony 
of  the  nation  which  has  the  most  successfully  and  per- 
sistently nourished  and  developed  her  commercial  inter- 
ests. In  the  matter  of  free-trade,  there  are  evident 
reasons  why  her  example  should  not  be  followed.  In 
the  matter  of  the  standard  of  equivalency  no  such 
reasons  have  yet  been  assigned.  The  idea  of  injuring 
her  financially,  by  demonetizing  gold  and  compelling  our 
people  to  buy  it  at  a  premium  to  pay  ten  or  more  bil- 
lion dollars  of  existing  gold-debts,  is  too  evident  an 
absurdity  to  need  rebuttal. 


THE  WORLD'S  VERDICT.  35 

Practically,  we  may  say  that  the  whole  world  has  de- 
cided against  the  unrestricted  coinage  of  two  metals. 
All  the  great  commercial  nations  of  Europe  and  America 
have  adopted  the  gold-standard  ;  the  most  part  of  them 
after  a  long  struggle.  All  the  great  nations  of  Asia,  with 
Mexico  and  Central  America,  have  also  decided  against 
the  double-standard  and  adopted  silver.  What  should 
be  the  force  of  this  verdict  ? 

It  is  not  to  be  denied  that  the  world  may  be  wrong 
in  this  matter  ;  but  it  lies  with  those  who  claim  that 
it  is,  to  prove  the  fact  beyond  a  reasonable  doubt  be- 
fore they  ask  the  people  of  the  United  States  to  accept 
their  theory. 

Under  the  circumstances,  it  becomes  important  to 
consider  whether  we  would  better  seek  to  cure  our 
financial  ills  by  making  another  attempt  to  solve  the  old 
riddle  in  the  old  way,  or  try  to  find  a  remedy  at  least  not 
inconsistent  with  the  world's  experience.  Shall  we  go 
back  to  the  canoe,  or  improve  the  side-wheeler  ? 


V. 

MONETARY  EXPERIMENTS. 

OUR  own  financial  history  has  been  very  prolific  in  ex- 
periments intended  to  improve  or  increase  the  currency. 
Most  of  these  have  been  along  the  line  of  bank-issues  of 
substitute-money,  being  almost  infinitely  varied  devices 
for  making  more  or  less  cash  plus  a  great  deal  of  credit 
sustain  the  fiction  of  the  constant  redeemability  of  such 
issues.  Some  of  these  experiments  were  quite  remark- 
able for  the  ingenuity  displayed  in  making  nothing  seem 
to  be  equivalent  to  something.  They  very  properly 
earned  for  our  State-bank  issues  the  name  of  "  wild-cat 
currency,"  by  the  amazing  agility  displayed  in  ascending 
and  descending  the  scale  of  equivalency,  it  being  abso- 
lutely necessary  that  a  business  man  should  carry  a 
bank-note  directory  in  order  to  keep  track  of  the  shrink- 
age from  day  to  day  of  various  issues  of  substitute- 
money. 

To  this  experience  with  state  banks  of  issue,  has 
been  added  that  of  a  great  national  institution,  the  fiscal 
agent  of  the  government  controlling  its  funds  and  having 
the  use  of  its  deposits.  Its  overthrow  constitutes  one 
of  the  most  dramatic  episodes  of  our  history.  The  suf- 

36 


MONETARY   EXPERIMENTS.  37 

fering  that  resulted  is  even  yet  one  of  the  most  vivid 
remembrances  of  the  elders  of  to-day  who  were  the 
children  or  youths  of  that  epoch. 

This  experience  has  been  supplemented  by  two  of  the 
most  remarkable  experiments  in  the  field  of  credit-money 
ever  made,  to  wit  :  i.  The  issue  by  the  government  of 
demand-notes  professing  constant  redeemability  in  coin, 
at  a  time  when  such  redeemability  was  known  to  be  im- 
possible ;  their  maintenance  without  any  pretense  of  ful- 
filment of  this  pledge,  as  an  important  and  fairly  stable 
part  of  the  currency  for  seventeen  years  ;  the  ultimate 
redemption  of  this  long-deferred  promise  by  the  resump- 
tion of  specie-payments  in  1879  ;  the  evils  that  resulted 
from  the  constant  redeemability  of  these  demand-lia- 
bilities, after  they  had  served  the  purposes  of  currency 
with  admirable  stability  and  convenience  for  thirty 
years,  when  the  attempt  to  preserve  a  parity  of  value 
between  even  a  restricted  silver  currency  and  gold  caused 
a  "  run  "  upon  the  treasury  for  gold  which  there  was  no 
legal  method  of  supplying  except  by  increase  of  the 
bonded  debt. 

This  experiment,  extending  over  thirty-four  years,  the 
most  momentous  in  the  monetary  and  financial  history 
of  the  world,  is  unquestionably  the  most  important  ever 
made  in  the  field  of  credit-money.  Its  long-continued 
efficiency  and  close  approach  to  permanent  success,  must 
suggest  to  the  dullest  comprehension  the  belief  that  its 
defects  are  certainly  remediable.  As  a  matter  of  fact,  its 
partial  failure  during  recent  years  was  wholly  due  to  the 


38  MONETARY  EXPERIMENTS. 

abandonment  of  one  of  the  fundamental  principles  on 
which  it  was  based — to  wit,  the  payment  of  customs 
duties  in  gold  in  order  to  provide  a  continuous  supply  of 
gold  coin  to  meet  the  constant  redeemability  of  these 
issues.  Left  without  this  safeguard  by  the  clamorous 
but  wholly  illogical  demand  that  the  nation  should 
receive  its  promises  to  pay  in  discharge  of  all  obligations 
to  itself,  the  treasury  was  exposed  to  a  continuous  de- 
mand for  gold  without  any  authorized  means  of  ob- 
taining it  except  making  loans  to  secure  a  constantly 
threatened  reserve.  This  was  aggravated  if  not  precipi- 
tated by  the  strenuous  and  heroic  efforts  of  the  govern- 
ment to  maintain  a  parity  of  equivalency  between  our 
silver  coinage  supplemented  by  more  than  half  a  billion 
dollars  of  silver-certificates,  and  gold.  Nothing  so  clearly 
shows  the  amazing  strength  of  our  national  credit  as  the 
fact  that,  despite  this  unequal  and  hopeless  struggle,  our 
terminal-credit  or  bonded  debt  has  remained  at  a  pre- 
mium unequalled  in  the  history  of  national  finance. 

2.  Another  remarkable  experiment  in  the  field  of 
credit-money  was  the  establishment  of  our  present  sys- 
tem of  National  Banks.  The  features  which  distinguish 
this  from  all  other  systems  of  banks  of  issue  are  :  (i) 
That  its  issues  are  wholly  secured  by  the  deposit  of  ter- 
minal-credit or  interest-bearing  bonds  of  the  country. 
(2)  That  the  government  guarantees  the  payment  of  its 
issues  and  regulates  their  amount,  and  (3)  that  its  issues 
are  redeemable  not  in  coin,  but  in  any  lawful  money 
of  the  United  States.  The  credit  of  these  issues  rests 


MONETARY  EXPERIMENTS.  39 

entirely  upon  the  public  confidence  in  this  guarantee, 
not  being  affected  in  the  slightest  degree  by  the  stability 
or  financial  condition  or  repute  of  the  bank  in  whose 
name  they  are  issued.  It  presents,  therefore,  the  un- 
precedented anomaly  of  a  banking  system  the  stability 
of  whose  issues  is  unaffected  by  the  failure  of  the  bank 
which  puts  them  in  circulation.  The  notes  of  a  "  broken  " 
National  bank  pass  current  just  as  readily  as  those  of 
the  most  stable  and  prosperous.  Only  one  objection 
obtains  to  this  remarkable  experiment — the  cost  of  the 
currency  thus  provided.  This  cost  consists  of  two  ele- 
ments— the  interest  on  the  bonds  deposited  to  secure 
the  issues  and  the  exemption  of  both  bonds  and  issues 
from  state  and  municipal  taxation.  The  former  ele- 
ment alone  makes  the  cost  of  $250,000,000  of  these 
issues  based  on  four  per  cent,  bonds  $10,000,000  a  year. 
The  amount  of  the  other  element  of  cost,  exemption 
from  taxation,  is  not  easily  determinable. 

3.  A  third  notable  experiment  was  the  issue  of  silver- 
certificates,  a  consequence  of  the  policy  of  upholding 
to  the  utmost  limit  of  the  national  credit,  the  parity  of 
equivalency  between  silver  and  gold  at  the  ratio  of  16  to  i. 
These  certificates  pledge  the  government  to  pay  to  the 
bearer  on  demand  the  number  of  silver  dollars  men- 
tioned in  each.  Being  exchanged,  in  the  course  of 
business,  for  legal-tender  treasury-notes  which  are  re- 
deemable in  coin,  they  become,  indirectly,  redeemable 
in  gold.  They  represent  the  larger  part  of  our  silver  coin- 
age in  circulation.  By  this  system  of  continuous  ex- 


4O  MONETARY   EXPERIMENTS. 

change  it  results,  therefore,  that  the  demand  for  gold 
which  has  recently  caused  so  large  an  increase  of  our 
bonded  debt,  is  in  reality  only  a  constantly  recurring 
redemption  of  our  silver  coinage  or  its  equivalent,  sil- 
ver-certificates, in  gold  coin.  This  experiment  is  valu- 
able as  showing  that  there  is  a  limit  to  the  ability  of 
even  the  richest  and  most  prosperous  nation, of  the 
world  to  maintain  with  its  credit,  parity  of  value  be- 
tween two  constantly  diverging  standards  of  equivalency. 
It  also  proves  the  practicability  of  making  the  terminal- 
credit  of  the  nation  the  basis  of  a  phenomenally  stable 
and  uniform  credit-currency. 

Without  further  consideration  of  details,  it  may  be 
said  that  our  monetary  experiments  thus  far,  have  estab- 
lished beyond  question  the  following  propositions  : 

I.  A  great  national  bank,  modelled  on  the  plan  of  the 
great  banking  institutions  of  Europe,  whether  it  be  the 
fiscal  agent  of  the  government  or  not,  is  an  aggrega- 
tion of  monetary  power  obnoxious  to  the  genius  of  our 
people. 

II.  That  a  system  of  state  banks,  controlled  by  the 
several  commonwealths  of  the  Union,  lacks  stability  and 
uniformity  to  a  degree  altogether  unlikely  ever  again  to 
command  popular  approval. 

III.  That  the  demand-notes  of  the  government  were  a 
thoroughly  satisfactory  and  stable  currency  until  they 
came  to  be  used  by  the  traffickers  in  currency  as  a  con- 
venient means  for  collecting  gold  for  speculative  pur- 
poses. 


MONETARY  EXPERIMENTS.  4* 

IV.  That  the   terminal-ciQ&it  of  the   United   States, 
that  is,  its  bonds,  is  kept  above  par  without  difficulty 
and  for  almost  any  conceivable  amount. 

V.  That   the  present   system  of  National  Banks,  the 
issues  of  which  are  redeemable,  not  in  coin,  but  in  any 
"  legal  money  of  the  United  States,"  has  been  the  most 
stable,  uniform,  and  equable  bank-currency  ever  known, 
because  its  issues  are  sustained  by  the  amazing  desira- 
bility of  the  terminal-credit — that  is,  the  interest-bearing 
bonds  of  the  United  States. 

These  results  necessarily  suggest  the  inquiry  whether 
it  is  not  better  to  seek  a  remedy  for  our  present  mone- 
tary evils  in  some  other  direction  than  by  continuing 
the  attempt  to  secure  the  stable  equivalency  of  even  a 
restricted  coinage  of  two  precious  metals  at  a  fixed 
ratio. 


VI. 

"THE  CRIME  (?)   OF    1873." 

THE  only  coinage  experiment  of  any  importance 
which  has  been  made  thus  far  in  the  monetary  history 
of  the  United  States  consists  of  four  remarkable 
acts — that  of  1873,  now  held  up  to  popular  condem- 
nation by  the  advocates  of  the  unrestricted  coinage  of 
silver  as  "  the  crime  of  '73,"  the  act  of  1878,  which  was 
the  result  of  popular  protest  against  the  restriction  of 
silver-coinage,  the  modification  of  the  latter  by  the  act  of 
1890,  and  the  repeal  of  the  purchasing  clause  of  this  latter 
act,  popularly  known  as  the  "  Sherman  Bill,"  in  1893. 
To  these  may  be  added  the  various  measures  adopted 
during  this  interval  intended  to  stimulate  the  use  and 
circulation  of  silver  coins  and  their  equivalents,  silver- 
certificates.  Among  these  may  be  mentioned  the  pro- 
hibition of  further  issues  of  national-bank  notes  and 
greenbacks  under  the  denomination  of  five  dollars,  and 
the  authorization  of  silver-certificates  of  the  denomina- 
tions of  one  and  two  dollars.  This  legislation,  extending 
over  a  period  of  eighteen  years,  supplemented  as  it  haa 
been  by  almost  incredible  exertions  of  successive 
secretaries  of  the  Treasury  to  give  it  effect,  is  well 

42 


"THE  CRIME  (?)  OF    1873.*'  43 

entitled  to  rank  as  the  most  stupendous  experiment 
ever  made  in  the  long-continued  battle  of  the  stan- 
dards having  for  its  object  the  maintenance  of  parity 
of  equivalency  between  two  coin-metals.  Its  de- 
tails are  so  numerous  as  to  be  confusing  to  one 
who  attempts  to  master  the  relations  of  each 
to  the  real  issue  involved.  Advantage  has  been 
taken  of  this  complexity  to  give  an  altogether  false  im- 
pression of  the  real  purpose  and  character  of  these  acts. 
The  story  in  detail  from  1879  until  1890,  is  given  with 
wonderful  accuracy  and  fulness  in  Prof.  Taussig's 
remarkable  brochure,  The  Silver  Situation  in  the  United 
States  (G.  P.  Putnam's  Sons,  New  York).  Unfor- 
tunately this  work,  like  many  others  of  similar  char- 
acter, while  leaving  nothing  to  be  desired  in  its 
treatment  of  the  subject  within  specified  limits,  has 
failed  to  impress  upon  the  popular  mind  the  true  relation 
of  these  acts  to  the  question  that  underlies  the  conflict 
between  silver  and  gold,  by  showing  that  the  very  pur- 
poses avowed  by  the  advocates  of  "  free  silver  "  may 
more  easily  and  surely  be  attained  by  other  means.  In- 
stead of  advocating  the  amendment  of  our  credit-cur- 
rency as  a  means  both  of  remedying  the  evils  of  our 
monetary  system  and  reducing  the  interest-charge  of  our 
public  debt,  they  advocate  its  retirement  and  a  conse- 
quent increase  of  bond  indebtedness. 

What,  in  brief,  were  the  provisions  of  these  acts  and 
their  true  relation  to  our  monetary  and  financial  condi- 
tions ?  The  act  of  1873,  designated  by  the  advocates  of 


44  "THE  CRIME  (?)  OF   1873." 

unrestricted  silver  coinage  as  a  "  crime  of  inconceiv- 
able enormity,"  so  far  as  the  character  of  the  currency  is 
concerned,  consisted  of  two  provisions,  to  wit :  (i)  It 
made  the  gold  dollar  of  25$  grains  of  fine  gold  the 
standard  of  equivalency.  (2)  It  prohibited  the  further 
coinage  of  silver  on  private  account.  It  did  not  demone- 
tize silver  already  coined,  but  left  it  a  full  legal-tender  at 
the  existing  ratio  of  sixteen  to  one. 

The  act  of  1878,  also,  consisted  of  two  relevant  pro- 
visions :  (i)  It  required  the  government  to  purchase 
every  month  two  million  dollars'  worth  of  silver  bullion 
for  coinage  into  silver  dollars.  This,  at  the  market  value 
at  that  time,  amounted  very  nearly  to  the  total  silver 
production  of  the  United  States.  (2)  It  provided  for 
the  issue  of  silver-certificates,  each  entitling  the  holder 
to  a  specified  number  of  silver  dollars  on  demand. 

The  act  of  1890  required  the  Secretary  of  the  Treas- 
ury to  purchase  each  month  four  and  a  half  million 
ounces  of  silver  bullion  at  the  market  price,  and  pay  for 
it  in  treasury-notes  of  the  United  States,  which  it  made 
full  legal-tender  for  the  payment  of  all  debts.  It  also 
made  them  redeemable  in  either  gold  or  silver  coin  at 
the  discretion  of  the  Secretary  of  the  Treasury,  and 
required  every  possible  effort  to  be  made  to  keep  silver 
at  a  parity  of  equivalency  with  gold.  This  provision 
was  especially  emphatic  and  was  accompanied  by  a  pro- 
vision that  the  treasury-notes  authorized  by  it  might  be 
issued  in  denominations  as  low  as  one  dollar,  in  order 
that  silver  might  take  the  place  of  the  greenbacks  and 


"THE  CRIME  (?)  OF    1873."  4$ 

national-bank  notes  of  denominations  less  than  five  dol- 
lars which  were  withdrawn  from  circulation  by  the  act 
of  1885. 

Was  the  act  of  1873  a  crime  ?  What  are  the  reasons 
given  for  denouncing  it  as  such  ?  It  is  claimed  that  it 
caused  the  depreciation  of  silver  ;  that  by  restricting 
the  currency,  it  caused  the  general  decline  in  prices 
which  has  since  occurred  ;  that  it  was  inspired  by  capi- 
talists, bankers,  the  Rothschilds,  "  gold-bugs,"  and  vari- 
ous other  demoniac  influences,  whose  purpose  was  to 
oppress  the  poor  and  consume  the  debtor  ;  that  silver 
being  "  the  poor  man's  money,"  the  adoption  of  the  gold 
standard  of  equivalency  tends  to  make  the  rich  richer 
and  the  poor  poorer.  All  these  allegations,  except  the 
motive  alleged,  are  said  to  be  proved  by  the  tendencies 
and  conditions  developed  in  the  United  States  since  that 
time. 

So  far  as  the  motive  is  concerned,  it  is  a  reflection  on 
every  American  citizen  to  assume  that  any  considerable 
body  of  our  people  desire  to  oppress  the  weak  or  im- 
poverish the  poor.  Parties  and  peoples  are  always  sin- 
cere. They  may  make  mistakes,  but  they  never  commit 
crimes.  The  slave-holder  just  as  firmly  believed  slavery 
to  be  promotive  of  the  general  welfare  as  its  opponents 
believed  it  subversive  of  justice. 

What  were  the  circumstances  under  which  this 
act,  charged  to  have  been  inspired  by  unholy 
purposes  and  attended  with  such  malign  conse- 
quences, was  adopted  ?  The  credit  of  the  United 


46  "  THE  CRIME  (?)  OF    1873." 

States  had  been  just  as  important  an  element  of  its  suc- 
cess in  putting  down  the  rebellion  and  preserving  the 
union  as  the  patriotism  of  our  people.  It  armed  the 
soldier  and  fed  him  while  he  fought.  Because  of  this, 
every  utterance  of  the  government  and  the  universal 
voice  of  the  people,  day  after  day,  through  the  long  years 
of  conflict,  was  a  continuing  pledge  to  all  the  world  that 
we  would  pay  every  obligation,  keep  the  national  honor 
untarnished,  and  make  our  currency  equal  to  the  best. 
For  twelve  years  we  had  been  bravely  striving  to  redeem 
this  pledge.  For  twelve  years  specie  payments  had  been 
suspended.  We  were  struggling  on  toward  resumption 
under  a  load  of  debt,  a  very  large  portion  of  which, 
almost  a  billion  dollars,  must  soon  be  refunded.  The 
great  commercial  nations  of  the  world  to  whom  we 
looked  to  take  our  bonds,  had  adopted  the  gold  standard 
or  were  marching  steadily  towards  it.  Silver  had  already 
fallen  in  value  below  the  ratio  in  all  European  countries, 
though  yet  a  trifle  above  our  own.  The  production  of 
both  gold  and  silver  was  increasing  at  a  rate  unprece- 
dented in  the  world's  history.  France,  Belgium,  Italy, 
and  Switzerland  had  just  restricted  the  coinage  of  silver 
by  the  terms  of  a  common  treaty.  Germany  was  strug" 
gling  to  dispose  of  her  vast  accumulation  of  silver  and 
modelling  her  monetary  system  on  that  which  England 
had  maintained  for  two  hundred  years.  Could  we  hope 
to  resume  specie  payments  in  silver  ?  Who  would  take 
our  bonds  unless  payable,  principal  and  interest,  in  gold  ? 
Were  we  to  invite  the  scorn  of  the  world  by  repudiating 


"THE  CRIME  (?)  OF    1873."  47 

our  obligations  as  had  been  done  with  our  "  continental 
currency  ?  "  Were  we  to  ask  those  who  had  trusted  us 
at  home  and  abroad  to  take  a  currency  already  stricken 
with  blight,  which  the  most  intelligent  and  prosperous 
nations  of  the  world  had  rejected  or  restricted  ?  The 
supreme  duty  of  the  hour  was  to  maintain  our  credit. 
It  could  be  done  only  by  the  adoption  of  the  gold 
standard.  Even  this  would  have  been  ineffective  had 
we  continued  to  coin  silver  on  private  account,  to  allow 
every  one  who  had  silver  bullion  to  put  on  it  our  stamp 
of  equivalency  at  a  ratio  greater  than  its  commercial 
value. 

The  act  of  1873  was  neither  a  crime  nor  a  mistake, 
but  an  act  of  the  highest  patriotism  and  the  soundest 
policy.  As  a  result  of  it,  we  safely  reached  the  haven  of 
resumption  six  years  later,  after  seventeen  years  of  sus- 
pension, funded  our  enormous  debt,  which  two  years  later 
began  to  grow  steadily  less,  and  in  1879  entered  upon  the 
most  stupendous  struggle  to  rehabilitate  silver  in  order 
to  benefit  our  silver  producers  and  encourage  and  stim- 
ulate the  development  of  this  industry,  that  the  world  has 
ever  witnessed. 

Every  step  in  our  financial  history  since  1879  has 
been  intended  to  promote  the  use  and  uphold  the  parity 
of  equivalency  of  our  silver  coinage.  Instead  of  being 
dominated  by  "  gold-bugs,"  both  of  the  great  parties  have 
been  subservient  to  silver  to  a  degree  which  has  seriously 
threatened  the  nation's  credit,  and  has  been  one  of  the 
chief  causes  of  the  existing  depressed  financial  conditions. 


48  "THE  CRIME  (?)  OF   18/3." 

Silver  is,  in  one  sense,  it  is  true,  "  the  poor  man's  money  "  : 
it  is  the  money  of  those  nations  in  which  the  largest 
proportion  of  the  most  abject  and  degrading  poverty  is 
found.  Look  at  the  list  of  countries  in  which  silver  is 
the  standard — China,  Japan,  India,  Mexico,  Central 
America,  the  Argentine  Republic  !  It  would  be  unfair  to 
say  that  silver  has  caused  the  industrial  conditions  which 
there  prevail,  just  as  fallacious,  indeed,  as  it  is  to  attribute 
our  present  industrial  depression  to  the  act  of  1873.  This 
thing  is  certain,  however  :  a  silver  currency  has  never 
shown  any  tendency  toward  improving  these  conditions 
— where  it  has  been  longest  used  poverty  is  most  abun- 
dant and  most  blighting  in  its  character.  Is  it  worth 
while  to  intensify  poverty  in  order  to  secure  the  adop- 
tion of  "  the  poor  man's  money  "  ? 


VII. 
DEPRECIATION   OF  SILVER. 

FINANCIAL  and  industrial  conditions  are  rarely  the 
result  of  a  single  cause  or  the  immediate  consequence  of 
a  mistaken  monetary  policy.  Indeed,  it  may  perhaps  be 
safely  said  that  except  in  case  of  war,  famine,  pestilence, 
or  other  widespread  devastating  influence,  the  causes  of 
business  depression  are  never  single  or  immediate.  Fi- 
nancially, as  well  as  socially  and  politically,  general  con- 
ditions are  the  result  of  evolutionary  influences  which 
develop  slowly  and  become  manifest  only  in  results 
which  are  apt  to  be  considered  causal  because  of  prox- 
imity or  contemporaneousness,  rather  than  from  inher- 
ent character  and  actual  potency.  One  of  the  most 
difficult  questions  presented  by  the  pending  controversy 
in  regard  to  our  monetary  policy  is  as  to  the  cause  of 
the  depreciation  of  silver  since  1873  and  the  present 
general  decline  of  prices.  It  is  perfectly  natural,  at  the 
first  blush,  to  attribute  the  former  to  the  adoption  of  the 
gold  standard,  because  that  was  very  nearly  contempora- 
neous with  the  first  evidence  of  marked  decline.  It  is 
equally  natural  to  attribute  the  present  decline  in  prices 
and  universal  business  depression  to  this  change  in  our 

49 


5O  DEPRECIATION  OF  SILVER. 

monetary  system,  because  of  the  general  impression  that 
money  in  some  mysterious  way  controls  prices  and  regu- 
lates the  volume  of  business. 

It  is,  of  course,  evident  to  all  that  the  universal  law  of 
supply  and  demand  is  an  agency  of  supreme  potentiality 
in  determining  the  rise  and  fall,  within  certain  limits,  of 
the  prices  of  all  commodities.  The  scarcity  of  anything 
which  possesses  appreciable  desirability  enhances  its 
value,  while  its  abundance  not  only  reduces  its  price, 
but  up  to  a  certain  point  enhances  the  demand  by 
increasing  its  use  or  consumption.  So  far  as  the  neces- 
saries of  life  are  concerned,  the  limit  of  increased  de- 
mand is  reached  when  all  can  obtain  enough  to  supply 
their  reasonable  needs  at  existing  rates.  For  instance, 
the  present  consumption  of  breadstuffs  cannot  be  mate- 
rially increased  by  any  depreciation  of  prices.  No  con- 
siderable portion  of  the  population  of  the  world  would 
consume  any  more  flour  at  one  dollar  a  barrel  than  at 
the  present  rate.  Even  at  fifty  cents  a  barrel  there 
would  be  no  generally  increased  demand,  except  as  men 
might  be  tempted  to  lay  in  a  store  for  future  use.  Very 
few  would  consume  any  more  than  they  now  do,  even  if 
it  were  obtainable  at  ten  cents  a  barrel.  The  limit  of 
consumption  is  the  limit  of  demand. 

In  seeking  to  apply  this  principle  to  the  depreciation 
of  silver,  we  are  met  with  certain  plausible  and,  at  first 
sight,  apparently  insuperable  objections.  We  are  told 
(i)  That  the  chief  use  of  silver  being  as  a  coin-metal, 
the  prohibition  of  its  coinage  on  private  account  was 


»  DEPRECIATION  OF  SILVER.  51 

an  interference  with  the  right  of  the  citizen  to  seek  a 
market  for  his  wares,  that  is  of  silver  bullion,  in  their 
most  desirable  form  ;  (2)  that  such  interference  with  the 
right  of  the  producer  was  an  artificial  restriction  of  a 
natural  demand  which  produced  an  artificial  depreciation 
in  its  value.  (3)  That  the  limit  of  demand  had  evidently 
not  been  reached,  because  gold,  which  is  chiefly  used  for 
the  same  purpose,  has  increased  in  amount  during  the  past 
fifty  years  at  an  even  greater  proportional  rate  than  sil- 
ver, but  has  not  only  not  depfeciated  but  has,  perhaps, 
even  increased  in  value. 

As  to  the  first  two  of  these  objections  it  must  be  borne 
in  mind  that  the  original  demand  for  silver  as  a  coin- 
metal  was  just  as  artificial  as  the  restriction  complained 
of.  Nations  chose  to  adopt  silver  and  gold  as  coin- 
metals.  They  had  a  perfect  right  to  have  adopted  any 
other  metals  for  this  purpose,  or  even  to  have  elaborated 
a  system  of  currency  not  based  on  metallic  values  at  all. 
But  they  did  adopt  these  by  general  accord,  and  endeav- 
ored to  fix  the  ratio  of  equivalency  between  them.  This 
varied  greatly  with  the  varying  supply  of  each  and  a 
variable  demand  for  one  or  the  other.  In  Caesar's  time 
it  was  thought  that  eight  parts  of  silver  were  equal  in 
value  to  one  of  gold  ;  then  it  fell  to  ten,  twelve,  fifteen, 
until,  finally,  the  ratio  was  fixed  in  our  currency  at 
sixteen  to  one.  This  ratio  was  below  the  real  value  of 
silver — that  is,  our  silver  coin  was  worth  more  as  silver 
than  as  coin.  It  was  more  profitable  to  buy  silver  coin 
to  melt  than  to  buy  silver  bullion  to  coin.  Under  these 


52  DEPRECIATION   OF   SILVER. 

circumstances,  our  mints  were  open  to  all  owners  of 
bullion  to  have  it  coined  if  they  chose.  Most  of  the 
continental  nations  of  Europe  had  fixed  the  ratio  at 
fifteen  and  a  half  parts  of  silver  to  one  of  gold.  Even 
at  this  rate,  silver  bullion  was  usually  worth  more  than 
gold  in  the  markets  of  the  world.  England  having  fixed 
her  coin-ratio  at  about  fourteen  and  a  quarter  to  one, 
her  silver  coinage  was  depleted  by  being  bought  up  for 
gold,  the  silver  being  exported  for  profit.  As  a  result  of 
this  gold  became  superabundant,  and  there  was  a  lack  of 
silver  for  the  smaller  transactions  of  life.  To  prevent  this, 
silver  was  practically  demonetized,  that  is,  its  legal-tender 
quality  was  restricted  to  forty  shillings.  This  prevented 
its  use  in  all  great  monetary  transactions,  beyond  that 
amount,  and  the  coinage  being  restricted  and  no  credit 
money  under  the  value  of  five  dollars  being  allowed,  a  spe- 
cial field  for  silver  coin  was  created  which  at  this  time  re- 
quires in  coinage  $115,000,000  of  silver,  an  amount  about 
one-fifth  as  large  as  its  stock  of  gold,  $580,000.000,  and 
a  little  larger  than  the  volume  of  its  authorized  credit 
currency,  which  is  $113,000,000.  This  policy  was  sup- 
plemented by  severe  penalties  against  melting  or 
exporting  silver  coin  ;  the  purpose  being  to  keep  a 
highly  appreciated  but  restricted  silver  coinage  in  circu- 
lation for  small  transactions,  and  to  avoid  the  necessity 
and  danger  of  variability  of  equivalency  in  its  cur- 
rency. In  this  manner,  as  much  by  accident  as  by 
design,  England  came  to  adopt  the  gold  standard  of 
equivalency. 


DEPRECIATION  OF  SILVER.  53 

The  United  States,  having  fixed  the  ratio  of  equiva- 
lency much  nearer  the  commercial  value  of  silver  and 
below  that  of  other  countries,  that  is,  requiring  more 
parts  of  silver  to  equal  one  of  gold,  naturally  invited 
the  importation  of  foreign  silver  for  recoinage  here. 
Besides  this,  the  advantage  resulting  from  the  possession 
of  coin  in  a  country  but  scantily  provided  with  legal- 
tender  and  flooded  with  fluctuating  issues  of  substitute- 
money  was  sufficient  to  overcome  any  slight  variance  in 
value. 

Up  to  1849,  when  the  mines  of  California  became  a 
distinct  factor  of  the  world's  supply  of  precious  metals, 
there  was  an  evident  lack  of  enough  coin-metal  to  sup- 
ply the  demand  for  legal-tender.  This  fact  was  recog- 
nized by  Great  Britain  a  dozen  years  before  in  making 
the  issues  of  the  Bank  of  England  a  legal-tender  for  all 
debts,  and  her  example  was  followed  a  few  years  later 
by  the  government  of  France,  in  attaching  to  the  issues 
of  the  Bank  of  France  a  like  legal-tender  quality.  Both 
have  been  continued  to  this  time,  and  it  is  to  be  noted 
that  a  large  proportion  of  the  issues  of  both  these  insti- 
tutions are  based  on  investments  in  the  national  credit 
of  these  countries,  and  the  right  to  issue  such  legal- 
tender  notes  has  since  been  greatly  enlarged,  espe- 
cially in  France,  where  the  Bank  has  a  monopoly 
of  the  issue  of  credit  currency.  This  expansion  of  the 
volume  of  currency  by  the  issue  of  authorized  legal- 
tender  credit  money  by  two  leading  commercial  nations 
of  the  world  has  been  strangely  overlooked  as  an  ele- 


$4  DEPRECIATION   OF   SILVER. 

ment  of  the  monetary  problems  which  have  since  arisen, 
especially  in  this  country. 

The  entire  world-production  of  gold  and  silver  from 
1492  until  1849,  is  estimated  to  have  amounted  to  $9,397-, 
000,000  in  value.  Of  this,  $6,413,651,000  was  silver  and 
$2,985,437,000  was  gold.  The  production  of  each  of  the 
two  metals  in  1849  was  almost  equal  in  value  to  the  other, 
being  $37,000,000  of  gold,  and  $39,000,000  of  silver. 

From  1849  until  1872  the  production  of  gold  greatly 
exceeded  that  of  silver,  the  former  being  $2,665,000,000 
and  the  latter  $1,107,000,000.  The  aggregate,  however, 
was  $3,772,000,000,  or  more  than  one-third  the  entire 
aggregate  production  of  the  previous  350  years.  From 
1873  until  1894,  the  production  of  gold  was  about  equal 
with  that  of  silver  in  value,  being  $2,526,000,000  of  gold, 
and  $2,748,000,000  of  silver.  The  aggregate  for  these 
twenty-one  years  amounted,  however,  to  the  enormous 
sum  of  $5,274,000,000,  or  more  than  half  the  entire  world- 
product  from  1492  to  1849  !  Thus  we  see  that  the 
aggregate  increase  of  coin-metal,  including  both  gold  and 
silver,  from  1849  to  1894,  amounted  to  $9,046,000,000, 
almost  equalling  the  entire  production  of  the  world  dur- 
ing all  the  previous  period.  The  production  of  gold 
during  1895  and  1896  it  is  estimated  in  round  numbers 
will  amount  to  more  than  $400,000,000  a  year,  or  $800,- 
000,000  in  all.  So  that  we  witness  the  amazing  spectacle 
of  the  supply  of  coin-metals  having  more  than  doubled 
in  forty-seven  years,  during  which  the  population  of  the 
world  cannot  have  increased  over  twenty  per  cent. 


DEPRECIATION  OF  SILVER.  55 

Such  an  enormous  increase  of  coin-metal  must  of 
necessity  cause  some  depreciation  in  its  value.  This 
would  be  expected.  But  we  are  met  with  the  startling 
fact  that,  in  this  interval,  gold  has  increased  two  and  one- 
half  times  the  amount  produced  in  the  previous  three 
centuries  and  a  half,  while  silver  has  only  increased 
about  fifty  per  cent,  of  its  previous  volume.  Yet  silver 
has  depreciated  in  purchasing  power  or  in  commercial 
value  almost  one-half,  while  gold  has  not  depreciated  at  all ! 
Why  is  this  ?  This  question  we  shall  answer  in  the  next 
chapter. 


VIII. 

A  NEW   ECONOMIC  LAW. 

THE  law  of  supply  and  demand  is  supposed  to  be 
universal :  scarcity  appreciates  and  abundance  depreci- 
ates all  values.  Hitherto  there  has  been  no  exception  to 
its  operation,  save  the  limitation  already  pointed  out. 
Yet  here  is  an  instance  in  which  the  supply  of  one  of  the 
most  notable  products  of  the  world  increases  two  and 
one-half  times  in  volume  within  fifty  years  and  does  not 
depreciate  at  all,  while  another  product,  used  for  the  same 
purpose,  increases  only  one-half  its  volume  during  the 
same  period  and  depreciates  one-half  in  value.  What 
has  caused  this  difference  ? 

The  answer  of  the  advocates  of  unrestricted  coinage 
is  that  the  demonetization  of  silver,  that  is,  the  adoption 
of  the  gold  standard  and  refusal  to  coin  on  private  ac- 
count, has  restricted  its  use  and  caused  its  depreciation. 
Unfortunately  for  this  explanation,  it  assumes  the  very 
fact  in  question.  The  real  inquiry  is  what  caused  the 
demonetization.  The  free-silver  writers  declare  it  to 
have  been  a  "gold-bug"  conspiracy  to  appreciate  the 
value  of  gold.  It  is  said,  in  reply  to  this,  that  the  de- 
monetization of  silver  was  a  natural  result  of  well- 

56 


A  NEW  ECONOMIC  LAW.  $? 

grounded  apprehension  of  the  decline  which  followed. 
Is  this  a  reasonable  hypothesis  ?  Let  us  see.  In  1867, 
the  commercial  value  of  silver  fell  below  15-!  to  i,  being 
15.57.  This  had  increased  in  1873  to  15.92.  In  1874  it 
fell  to  16.17,  falling  below  our  ratio  of  16  to  i  for  the 
first  time  since  its  adoption.  In  1875  it  fell  to  16.59,  and 
in  1876  it  fell  to  17.88.  From  that  time  on  until  1895, 
a  period  of  nineteen  years,  its  average  yearly  decline  has 
been  1.31,  falling  in  that  year  down  to  31.60  to  i. 

It  will  be  noted  that  the  depreciation  did  not  become 
very  serious  until  1876,  and  that  from  1878  until  the 
present  time  it  has  exceeded  1.30  a  year.  Now  it  hap- 
pens as  a  noteworthy  fact,  that  the  combined  production 
of  gold  and  silver  during  the  year  1878,  for  the  first 
time  in  the  world's  history,  amounted  to  more  than  two 
hundred  million  dollars — $214,000,000,  in  fact — and  this 
has  steadily  increased  until  in  1894  it  reached  the 
enormous  total  $397,000,000,  and  is  now  more  than 
$400,000,000  a  year,  with  evident  prospect  of  still  fur- 
ther increase. 

The  pertinency  of  these  figures  will  appear  when  we 
consider  the  fact  shown  by  the  report  of  the  Director  of 
the  Mint  for  1894,  that  the  average  coinage  of  silver 
during  this  period  amounted,  including  recoinage,  to  92. 25 
per  cent,  of  the  whole  annual  production  of  the  white 
metal.  So  that  we  have  the  fact  clearly  shown  that  the 
stock  of  silver  actually  in  use  during  this  period  as  cur- 
rency has  averaged  92.25  per  cent,  of  the  yearly  product. 
In  1873,  tne  aggregate  silver  currency  amounted  to 


58  A  NEW  ECONOMIC  LAW. 

I57-34  per  cent,  of  that  year's  product,  while  in  1894  it 
amounted  only  to  43.76  per  cent.,  a  loss  of  113.58  per 
cent.  During  the  same  time,  the  coinage  of  gold  has  also 
fallen  off.  In  1873  it:  amounted  to  238.31  of  the  year's 
supply;  in  1894  to  113.53,  being  a  loss  of  124.78  per 
cent,  of  the  year's  production.  During  the  whole  period, 
the  average  amount  of  gold  coin  amounted  to  106.47  Per 
cent,  of  the  annual  gold  supply.  Can  any  one  believe 
that  the  restriction  of  coinage  alone  caused  a  decline  in 
value  of  silver  of  47  per  cent.,  or  that  mere  mintage  of 
the  whole  surplus  and  future  product  would  restore  it 
to  parity  with  gold  ?  If  it  declined  because  it  was  not 
minted,  why  did  not  gold  decline,  the  coinage  of  which 
shrunk  during  the  same  period  124.78  per  cent,  of  its 
annual  product,  while  the  coinage  of  silver  only  fell  off 
113.58  per  cent,  of  its  yearly  product  ? 

The  simple  fact  is,  that  a  higher  law  than  that  of 
any  nation  has  wrought  the  depreciation  of  silver — a 
law  whose  operation  is  universal  and  which  the  mint- 
mark  of  no  realm  can  seriously  affect.  If  all  the  silver 
in  the  world  were  given  the  stamp  of  our  coinage  to- 
morrow, the  relative  value  of  silver  and  gold  would  not 
be  appreciably  affected.  Why  not  ?  Because  it  is  con- 
trolled by  that  immutable  law  of  supply  and  demand 
which  is  a  part  of  universal  human  nature  and  controls 
the  ratios  that  prevail  between  all  appreciable  values. 

But  if  the  law  of  supply  and  demand  prevails  to  con- 
trol the  ratio  of  value  between  gold  and  silver  in  spite 
of  the  ratio  of  equivalency  established  by  law  between 


A  NEW   ECONOMIC   LAW.  59 

coined  gold  and  coined  silver,  why  has  not  gold  depre- 
ciated, the  supply  of  which  has  increased  proportionately 
three  times  as  fast  as  that  of  silver  ? 

It  is  just  here  that  a  principle  applies  which  governs 
the  operation  of  the  law  of  supply  and  demand  in  all 
similar  cases.  This  principle  has  been  entirely  neglected 
in  the  pending  controversy,  and,  so  far  as  the  writer  is 
aware,  has  never  before  been  clearly  formulated.  It  is 
as  follows  : 

WHEN  TWO  MATERIALS,  ONE  MORE  DESIRABLE  AND 
THE  OTHER  LESS  DESIRABLE  FOR  A  PARTICULAR  USE, 

ARE  CHIEFLY  DEVOTED  TO  THE  SAME  GENERAL  PURPOSE, 
AN  INCREASED  SUPPLY  OF  ONE  OR  BOTH  TENDS  TO  THE 
DEPRECIATION  OF  THE  LESS  DESIRABLE,  AND  DOES  NOT 
SERIOUSLY  AFFECT  THE  MORE  DESIRABLE  UNTIL  THE 
SUPPLY  OF  THE  LATTER  BECOMES  SO  ABUNDANT  AS  TO 
PRACTICALLY  SUBSERVE  THE  ENTIRE  USE  TO  WHICH 
BOTH  WERE  ORIGINALLY  APPLIED. 

In  this  case,  gold  and  silver  were  both  chiefly  used  as 
coin-metals.  Gold  was  preferable  to  silver,  especially  in 
the  more  important  functions  of  coin,  such  as  redemp- 
tion reserves  and  the  liquidation  of  trade  balances, 
because  it  represents  greater  value  with  less  bulk  and 
weight.  A  hundred  pounds  of  it  is  equal  in  value  to 
sixteen  hundred  pounds  of  silver,  so  that  the  mere 
difference  in  the  cost  of  transportation  gives  it  immense 
odds  in  preferability.  Every  pound  of  gold  added  to 
the  world's  stock  of  coin-metal,  therefore,  served  to  re- 
duce not  the  value  of  gold,  but  the  value  of  coin-metal, 


60  A  NEW   ECONOMIC   LAW. 

and  this  loss  fell  on  silver,  as  the  least  desirable  element 
of  the  aggregate  supply.  When,  therefore,  the  world's 
supply  was  doubled,  the  entire  depreciation  fell  on  silver, 
while  gold  has  maintained  its  value  without  perceptible 
declension. 

The  coinage  of  gold  has  declined  because  it  has  been 
found  to  be  even  better  adapted  to  the  use  to  which  it 
is  chiefly  applied,  to  wit,  the  liquidation  of  aggregate 
balances,  in  the  form  of  bullion  than  when  coined.  It 
is  also  more  easily  estimated  and  transported  with  less 
risk  and  less  waste  than  when  coined.  In  fact,  gold 
has  become  chiefly  a  commodity,  the  function  of  which 
is  not  to  circulate  as  coin  but  to  liquidate  balances  with 
the  utmost  nicety.  While  in  its  coined  state  it  is  a 
legal-tender,  the  government  whose  mint-mark  it  bears 
never  receives  it  as  coin  for  its  face-value,  but  estimates 
its  value  by  weight.  One  may  easily  prove  this  by  taking 
an  eagle  to  the  Sub-treasury  and  watching  the  clerk 
while  he  has  it  weighed  to  ascertain  its  real  value  and 
estimate  how  much  is  required  to  make  it  equal  to  the 
equivalency  represented  by  its  mint-mark. 

The  same  principle  is  illustrated  in  the  recent  fall  of 
horse-values.  There  was  probably  an  over-production 
of  horses,  just  as  there  has  been  an  over-production  of 
silver.  But  in  addition  to  that,  there  came  also  an  im- 
mense supply  of  other  agencies  designed  to  perform 
certain  of  what  had  been  the  chief  functions  of  the 
horse  more  efficiently  than  the  horse  could.  The  cable 
and  electric  cars  drove  the  horse-cars  from  the  streets. 


A  NEW   ECONOMIC  LAW.  6l 

The  bicycle  superseded  the  horse  in  other  uses,  to 
which  it  was  especially  adapted.  Horse-values,  as  a 
result,  fell  to  nothing.  Why  ?  Because  when  two  things 
one  more  and  the  other  less  desirable,  are  devoted  to 
the  same  specific  use,  an  increase  in  the  supply  of  either 
or  both,  depreciates  the  less  desirable.  Bicycles  and 
electric  motors  are  still  booming  :  the  horse  is  rapidly 
passing  from  use  and  has  fallen  very  near  to  zero  in 
value.  Instances  of  the  operation  of  this  law  might  be 
multiplied  almost  indefinitely.  An  example  familiar  to 
all  is  found  in  the  history  of  illuminants.  Kerosene  re- 
stricted the  demand  for  animal  fats  for  that  purpose. 
Gas  superseded  the  use  of  kerosene.  Electricity  came 
to  take  the  place  of  gas.  All  are  yet  in  use,  but  the  de- 
mand for  the  less  desirable  illuminants  has  successively 
been  restricted  by  the  more  desirable.  Each  caused 
depreciation  of  the  less  desirable  illuminating  agency. 

No  law  can  create  or  long  counteract  such  a  tendency. 
Silver  would  have  depreciated  if  every  ounce  which  was 
mined  had  been  coined  ;  and  its  depreciation  would 
have  been  much  more  rapid  but  for  the  heroic  action  of 
our  government  in  putting  its  amazing  credit  under  the 
galling  mass  of  coin-values.  If  the  production  of  gold 
should  greatly  decrease,  the  value  of  silver  would  prob- 
ably increase  because  necessity  would  compel  its  use  in 
some  form  as  a  currency-basis  ;  but  its  desirability  can- 
not be  restored  by  coinage  or  legislation.  Every  nation 
can  use  a  large  amount  as  currency  under  proper  restric- 
tions. A  combination  of  nations  might  provide  for  a 


62  A  NEW  ECONOMIC  LAW. 

much  larger  use  ;  but  no  nation  or  union  of  nations  can 
hold  two  unrestricted  coinages  of  varying  desirability  at 
a  stable  ratio  of  equivalency.  The  result  is  inevitable  : 
either  there  must  be  a  gold-standard  with  a  restricted  sil- 
ver-coinage, or  free  silver-coinage  with  gold  demonetized 
or  devoted  to  specific  functions.  In  any  case,  coinage  is 
certain  to  be  more  and  more  largely  supplemented  in  the 
future  by  legal-tender  credit  money,  which  has  the  great 
advantage  of  not  being  liable  to  any  variation  with  the 
standard  of  equivalency,  as  long  as  the  credit  on  which 
it  is  based  is  esteemed  reliable.  The  depreciation  of 
silver  was  an  inevitable  result  of  the  immense  increase  in 
the  supply  of  the  metals  which  are  used  not  only  as  coin, 
but  to  perform  the  functions  of  money  even  when  un- 
coined, and  the  prohibition  of  the  coinage  of  silver  on 
private  account  was  much  more  a  consequence  than  the 
cause  of  its  depreciation. 


IX. 

THE  DECLINE  OF  PRICES. 

THE  particular  feature  of  existing  conditions  which 
has  occasioned  more  uneasiness  in  the  public  mind  than 
any  other,  is  the  decline  in  price  of  nearly  all  prod- 
ucts, including  labor,  which  must  always  be  counted  as 
a  commodity  in  considering  economic  questions,  dur- 
ing the  last  twenty-five  years.  This  has  not  always 
been  uniform  during  this  period,  nor  have  wages  and 
other  products  always  declined  in  the  same  ratio.  The 
disturbing  influence  of  war,  a  greatly  depreciated  cur- 
rency, the  drain  of  military  service  on  the  labor-supply, 
and  other  similar  causes,  naturally  affected  the  question 
of  prices  very  seriously  during  the  entire  decade  1861-71, 
because  such  great  disturbance  of  the  normal  conditions 
of  supply  and  demand  is  not  immediately  removed  by 
cessation  of  the  disturbing  cause.  It  is  unquestionable, 
however,  that  since  the  latter  date  there  has  been  a  general 
depreciation  of  nearly  all  values  as  well  as  of  silver,  which 
has  no  doubt  been  quite  unprecedented  in  the  history 
of  our  country.  The  advocates  of  unrestricted  silver- 
coinage  declare  that  this  is,  in  the  main,  due  to  the 
demonetization  of  silver.  We  have  shown  that  the  de- 

63 


64  THE  DECLINE  OF  PRICES. 

preciation  of  silver  was  due,  in  large  part  at  least,  to 
another  cause — the  marvellous  increase  in  the  production 
of  coin-metal  since  1849.  We  come  now  to  consider  the 
question  whether  the  decline  of  prices  was  in  any  con- 
siderable degree  produced  by  the  demonetization  of 
silver. 

The  first  question  that  presents  itself  is,  How  could 
such  demonetization  affect  the  price  of  other  products  ? 
To  this  the  answer  is,  that  it  reduced  the  volume  of  the 
currency  and  thereby  increased  the  purchasing  power  of 
gold.  It  is,  therefore,  insisted  that  the  removal  of  this 
restriction  will  increase  the  amount  of  the  circulating 
medium  and  thereby  enhance  prices. 

The  force  of  this  argument  depends  very  largely  on 
the  answers  that  may  be  given  to  two  questions  :  (i)  Has 
the  restriction  of  silver  coinage  in  the  United  States  re- 
sulted in  a  reduction  of  the  volume  of  the  currency  ? 
(2)  Does  an  increase  of  the  volume  of  the  currency 
necessarily  result  in  an  enhancement  of  prices  ?  In 
considering  the  first  of  these  questions,  we  are  con- 
fronted at  the  outset  with  the  singular,  and  to  many  no 
doubt  startling  fact,  that  the  demonetization  of  silver  in 
the  United  States  not  only  has  not  resulted  in  reducing 
the  volume  of  the  currency,  but  in  its  actual  enlarge- 
ment, both  in  the  aggregate  and  in  its  per  capita  ratio  to 
the  population  of  the  country.  The  following  table, 
taken  from  the  estimates  of  the  Secretary  of  the  Treasury, 
makes  this  clear : 


THE  DECLINE  OF  PRICES.  6 

AMOUNT  OF  CURRENCY  IN  THE  TREASURY  AND  IN  CIRCU- 
LATION. 


IN  THE  TREASURY. 

IN  CIRCULATION. 

PER  CAPITA  IN 
CIRCULATION. 

1873—$    22,563,000 
1879  232,889,000 
1895  612,932,000 

$    751,881,000 
818,631,000 
1,604,131,000 

$l8.04 
16.75 
22.96 

All  estimates  in  regard  to  the  amount  of  currency  in 
circulation  are  necessarily  based  on  certain  assumptions 
which  can  never  be  said  to  be  exact.  One  of  the  chief 
causes  of  variance  is  as  to  the  force  to  be  given  to  the 
word  "  circulation."  One  class  of  experts  make  it  in- 
clude all  money  that  has  been  put  into  circulation, 
less  exports,  estimated  losses,  and  the  amount  in  the 
Treasury.  Another  class  insists  on  deducting  from  this 
amount  the  sums  held  by  banks,  insurance  and  loan  and 
trust  companies  as  reserves.  There  are  also  varying 
estimates  of  the  amounts  of  "  lost  money,"  both  coins, 
bank-notes,  and  treasury-notes.  These  latter  are  quan- 
tities which  can  never  be  determined.  Senator  Vest 
estimates  that  $250,000,000  of  gold  has  been  lost,  by  un- 
noted exportation  and  otherwise,  since  1873;  $20,000,000 
of  silver  coins  and  $55,000,000  of  United  States  notes  and 
treasury-notes,  and  $1,400,000  treasury-notes  of  1890, 
making  $332,400,000 — which  he  claims  have  been  "  lost," 
or  in  some  manner  have  slipped  out  of  the  country  or  out 


66  THE   DECLINE   OF   PRICES. 

of  existence  without  record,  in  twenty-two  years  !  These 
are  curious  questions.  Any  man  can  make  guesses  at 
them  and  then  argue  from  his  guesses.  There  has  been 
too  much  such  argument  upon  the  currency  question.  It 
is  always  amusing,  sometimes  instructive,  but  at  best  can 
only  be  accepted  as  "evidence  of  things  hoped  for/' 
The  expert's  testimony  must  always  be  estimated  not 
only  by  his  intelligence,  but  by  his  opportunity  and 
bias. 

There  are  certain  unquestionable  facts,  however, 
which  show  that  there  has  been  not  a  restriction  but 
a  positive  and  decided  increase  of  our  currency  since 
1873,  to  wit  : 

i. — We  have  now  outstanding  (July  i,  1896)  $98,000- 
ooo  legal-tender  treasury-notes  of  1890  ;  $33,400,000 
currency-certificates  and  $336,300,000,  silver-certificates 
making  $467,700,000,  of  credit-money,  which  was  not  in 
existence  in  1873,  every  dollar  of  which  resulted  from 
the  efforts  of  the  government  to  uphold  the  parity  of 
value  of  silver  after  1879. 

2. — We  have  in  the  Treasury  (July  i,  1896)  $378,000- 
ooo  silver  dollars  coined  since  1879,  which  cannot  be 
put  in  circulation  because  no  creditor  of  the  government 
wants  them. 

3. — We  have  also  in  the  Treasury,  $155,600,000  legal- 
tender  notes  of  the  government  and  $11,400,000  silver- 
certificates,  or,  leaving  out  of  consideration  the  United 
States  notes,  we  have  in  the  Treasury  now  $45,800,000, 
of  credit-money  of  the  United  States  issued  since  1879. 


THE  DECLINE  OF   PRICES.  67 

Now  the  whole  amount  of  money,  of  all  sorts,  in  the 
United  States,  in  1873,  including  specie  and  credit- 
money  in  the  Treasury,  according  to  the  report  of  the 
Secretary  of  the  Treasury  was  $774,445,000.  To  this  we 
have  added  since  1879,  in  silver  coinage,  currency-cer- 
tificates and  silver-certificates,  $778,500,000.  These  facts 
cannot  be  "  guessed  "  away,  and  they  abundantly  sustain 
the  proposition  that  the  demonetization  of  silver  has  not 
reduced  the  currency  and  such  reduction  cannot,  there- 
fore, have  been  the  cause  of  the  general  decline  in 
prices. 

As  to  the  second  inquiry,  Does  an  increase  of  the 
currency  necessarily  result  in  an  enhancement  of  values  ?  " 
there  has  long  been  an  active  controversy  between  two 
great  classes  of  economic  writers.  Their  disagreement 
is  perhaps  largely  a  matter  of  temperament.  The  great 
difficulty  seems  to  be  the  impossibility  of  eliminating  the 
effects  of  currency-inflation  from  the  influence  of  other 
attending  causes  of  appreciated  values.  Take  the  case 
of  our  own  experience.  It  is  not  sufficient,  in  order  to  ar- 
rive at  a  reliable  conclusion,  to  reduce  the  prices  of  staples 
to  gold-equivalency  during  the  period  of  inflation  during 
and  soon  after  the  War  of  the  Rebellion,  strike  an  average, 
and  say  that  the  result  is  the  effect  of  an  inflated  currency. 
Averages  are  delusive  things  at  best.  The  average  wealth 
of  a  hundred  men  may  be  $10,000  ;  but  one  man  maybe 
worth  $999,000  and  the  others  have  only  $1,000  all  to- 
gether. The  average  of  wealth  is  all  right,  but  it  does 
not  represent  the  average  condition.  So  in  the  case  in 


68  THE  DECLINE  OF  PRICES. 

hand,  the  average  of  prices  contains  certain  elements  of 
inflation  not  resulting  from  an  abundant  currency.  War 
created  an  abnormal  demand  for  some  of  the  staples 
and  an  abnormal  scarcity  of  others.  It  took  two  mill- 
ions of  men  out  of  the  ranks  of  labor  ;  created  an  ex- 
ceptional demand  for  iron,  provisions,  clothing,  and 
other  military  supplies,  all  of  which  were  subject  to  great 
waste  and  destruction,  and  greatly  restricted  the  supply 
of  cotton  and  naval  stores.  No  skill  can  eliminate  or 
define  the  force  of  these  elements  of  our  inflated  prices 
during  that  time. 

I  am  inclined  to  the  belief  that,  taken  by  itself,  a 
greatly  increased  currency  of  stable  character  tends  to 
increase  values  by  stimulating  business  and  increasing 
consumption,  especially  of  that  greatest  of  all  staples, 
labor.  It  is  to  be  noted,  however,  that  the  only  reliable 
instances  we  have  of  a  sudden  increase  of  a  perfectly 
stable  currency,  which  are  not  affected  by  other  influ- 
ences tending  to  modify  the  supply  or  demand  for  staple 
products,  seem  to  have  resulted  in  checking  further  de- 
pression by  restoring  confidence,  rather  than  in  any  per- 
manent advance  of  prices.  These  are  the  increased 
issues  of  legal-tender  Bank  of  England  notes,  and  the 
issue  of  clearing-house  certificates  in  the  cities  of  the 
United  States.  It  is  not  deemed  necessary  to  discuss 
this  question  further,  however,  since  a  way  will  here- 
after be  pointed  out  by  which  any  desirable  increase  of 
the  currency  may,  as  is  believed,  be  secured  without  risk 
of  depreciation  or  any  change  in  the  existing  stand- 


THE  DECLINE  OF  PRICES.  69 

ard  of  equivalency.  To  what  extent  even  such  an  in* 
crease  of  the  medium  of  exchange  would  enhance  values 
the  writer  is  not  prepared  to  say. 

There  is  another  force  which  has  been  at  work  in  the 
depression  of  prices  to  which  too  little  weight  has  been 
given  in  the  consideration  of  this  question.  Just  a  hun- 
dred years  ago,  Malthus  put  forth,  or  at  least  developed 
and  expanded,  a  theory  which  has  had  a  remarkable 
effect  on  the  economic  thought  of  the  world  through 
its  conscious  or  unconscious  acceptance  by  almost  all 
writers  and  thinkers  on  politico-economic  subjects.  It 
has  been  especially  delusive  in  its  effects  upon  American 
thought,  since  it  has  led  us  to  regard  our  industrial  and 
economic  conditions  as  too  greatly  affected  by  our  own 
financial  conditions  and  legislative  policy. 

This  theory  of  Malthus's  was,  in  brief,  that  the  sum  of 
human  labor  applied  to  the  productive  forces  of  nature 
was,  and  must  continue  to  be  in  an  increasing  ratio,  in- 
sufficient to  supply  human  needs.  In  other  words,  he 
declared  that  population  and  the  consequent  demand, 
especially  for  food-products,  increased  much  more  rap- 
idly than  the  capacity  of  the  world  to  supply  them. 
Since  that  time,  science  and  invention  have  been  applied 
to  production,  transportation,  the  preservation  of  prod- 
ucts, and  the  restriction  of  consumption,  to  such  an 
extent  that  it  is  probable  that  the  general  productive 
capacity  of  the  laborer  has  been  increased  tenfold — it 
may  be  even  more — in  its  relation  to  consumption.  In 
the  first  place,  the  capacity  of  the  soil  itself  has  been 


7O  THE  DECLINE   OF  PRICES. 

astonishingly  increased  by  the  adoption  of  scientific 
methods  and  the  use  of  scientific  fertilizers.  The  appli- 
cation of  machinery  to  agricultural  processes,  plowing, 
sowing,  reaping,  threshing,  has  many  times  increased 
the  individual  capacity  to  produce  and  reduced  in 
an  almost  corresponding  ratio,  the  consumption  on 
which  demand  depends.  Improvements  in  methods 
of  preservation,  such  as  canning  and  cold  storage, 
have  amazingly  restricted  waste.  The  substitution  of 
non-consuming  motors,  steam  and  electricity,  for  the 
horse,  have  in  a  still  greater  degree  increased  the  ability 
to  market  the  world's  products  without  waste,  and,  at 
the  same  time,  restricted  consumption  by  reducing  the 
number  of  laborers  required  to  move  a  specified  tonnage, 
while  almost  wholly  eliminating  the  consumption  of 
food-products  by  animate  motors — in  other  words,  the 
consumption  of  agricultural  products  by  draft  animals 
once  employed  in  transporting  the  world's  production. 

In  the  field  of  manufacturing  production  the  operation 
of  these  forces  has  been  even  more  marked  and  wonder- 
ful. One  man's  labor  in  the  production  of  steel  and  the 
grosser  steel  fabrics,  is  to-day  easily  equivalent  to  that  of 
a  hundred  men  a  hundred  years  ago.  Possibly  it  may  be 
even  in  excess  of  that  ratio.  So,  also,  in  the  manufacture 
of  textile  fabrics,  of  clothing,  shoes,  and  other  necessary 
articles ;  one  man's  labor  supplemented  by  machinery, 
improved  processes,  and  the  economics  of  aggregated 
production,  results  in  an  output  at  least  a  score  of  times 
as  great  as  was  possible  before  their  introduction.  The 


THE  DECLINE  OF   PRICES.  J\ 

result  of  these  conditions  is  that  we  have  at  length 
reached  the  point  where  Malthus's  theory  becomes  evi- 
dently false,  not  in  degree  only  but  in  its  essential,  funda- 
mental idea.  The  world's  labor  applied  to  the  production 
of  the  necessaries  of  life  for  any  specific  period  is  now 
much  more  than  sufficient  to  meet  the  world's  demand  for 
such  necessaries  during  a  like  period.  The  necessary 
result  is  to  increase  the  force  of  competition,  restrict 
the  demand  for  labor,  and  reduce  the  margin  of  profit. 

These  influences  happen  to  have  culminated  during 
the  last  quarter  of  a  century,  following  hard  upon  the 
war-epoch  of  inflated  prices,  being  coincident  with  the 
amazing  increase  in  the  supply  of  coin-metal,  the  depre- 
ciation of  silver,  the  experiment  of  legal-tender  credit- 
money  in  the  United  States,  and  the  attempt  to  uphold 
the  parity  of  silver  by  enforced  coinage  and  use  as  a 
basis  of  currency  at  a  ratio  far  above  its  commercial 
value.  For  a  time,  their  effect  was  modified  or  delayed 
by  an  immense  demand  for  railway  construction  and 
other  kinds  of  development  which  were  peculiarly  active 
during  the  period  immediately  succeeding  the  close  of 
the  war.  This  was  followed,  first  by  apprehension  of 
tariff  changes  which  might  affect  the  profits  of  produc- 
tion already  greatly  reduced  by  this  condition,  and 
afterwards  by  the  adoption  of  such  changes  which 
exposed  our  productive  industry  to  competition  with  the 
surplus  labor  of  the  rest  of  the  world  on  terms  peculiarly 
unfavorable  to  American  producers  and  in  the  same 
ratio  more  favorable  to  foreign  competitors.  The  result 


72  THE  DECLINE   OF   PRICES. 

has  been  a  great  improvement  in  the  conditions  of  for- 
eign production  and  a  more  than  corresponding  depres- 
sion of  American  industry,  because  of  the  culminating 
effects  of  actual  over-production,  of  restricted  demand, 
and  of  the  doubt  resulting  from  monetary  experiments 
of  unprecedented  extent  and  inherently  dubious  char- 
acter. 


X. 

"  VALUE,"  "  EQUIVALENCY,"  "  MONEY,"  "  CREDIT." 

MUCH  of  the  confusion  which  exists  upon  this  subject 
is  believed  to  arise  from  inadequate  or  inexact  defini- 
tions, especially  of  the  term  "value,"  and  neglect  of 
the  distinction  between  it  and  "  equivalency."  "  Money  " 
and  "  credit "  and  the  kinds  of  each  also  require  brief 
consideration. 

Value  is  the  quality  of  desirability,  or  the  degree  of 
desirability,  which  an  object  possesses  for  any  indi- 
vidual. It  is  not  an  attribute  of  matter  like  weight 
or  dimension,  but  an  expression  of  the  relation  that 
subsists  between  an  individual  consciousness  and  any 
material  object  or  immaterial  concept.  It  is  of  two 
kinds,  appreciable  and  inappreciable. 

Appreciable  value  is  that  desirability  which  may  be 
expressed  by  comparison,  on  which  a  price  may  be  set. 

Inappreciable  value  is  that  which  can  be  expressed 
only  by  contrast,  which  is  above  price  or  beyond 
measure. 

Equivalency  is  the  expression  of  price,  or  the  correla- 
tive term  by  which  appreciable  value  is  expressed. 

As  illustrating  these  definitions,  I  may  say  that  a  bushel 
of  apples  is  worth  fifty  cents  ;  that  the  pen  with  which  I 

73 


74  "  VALUE/'  "  EQUIVALENCY/'  ETC. 

write  is  worth  a  dollar  ;  that  the  sword  which  hangs 
above  my  desk  is  invaluable  j  that  life  is  beyond  all  price  • 
that  a  patriot  values  his  country  above  his  life  j  or  that 
the  Christian  values  the  hope  of  immortality  above  all 
earthly  things. 

No  one  would  ever  mistake  any  of  these  expressions 
of  value  ;  but  when  one  comes  to  attempt  to  explain 
the  cause,  origin,  or  source  of  such  concept,  that  is, 
on  what  common  quality  of  "  apples/'  "  pen,"  "  sword," 
"  life,"  "  country,"  and  "  hope  of  immortality,"  the 
"  value  "  attributed  to  each  depends,  he  simply  under- 
takes to  define  the  indefinable.  Value  is  merely  an 
expression  of  desirability,  and  the  causes  of  desirability 
are  infinite  and  constantly  varying  with  time,  location, 
distance,  or  other  conditions. 

In  the  above  instances,  I  say  the  bushel  of  apples  is 
worth  fifty  cents  because  that  is  the  price  at  which  they 
can  be  bought  or  sold  ;  the  pen  is  worth  a  dollar  because 
I  would  have  to  pay  that  sum  to  get  another  of  like 
quality,  or  think  I  would.  But  the  sword — why  should 
that  be  "  invaluable,"  that  is,  beyond  price  ?  It  is  only 
a  bit  of  steel  with  a  battered  scabbard  and  a  brass  hilt 
engraved  with  a  few  battle-names.  It  never  was  of  any 
use,  except  once,  and  then  only  for  a  fraction  of  a 
minute.  To  another  it  would  be  " worth"  nothing 
now.  Threaten  me  or  my  loved  ones  with  want  and  I 
would  sell  it  for  a  loaf.  That  is,  what  is  an  inappreci- 
able value  to-day,  witKout  any  change  in  its  character 
may  become  an  appreciable  value  to-morrow.  So,  too, 


"  VALUE,"  "  EQUIVALENCY,"  ETC.  75 

"  value  "  may  depend  altogether  on  location.  A  fur 
coat  may  be  worthless  in  the  tropics  and  worth  a  for- 
tune in  the  arctic  regions.  In  Samaria,  when  the  city 
was  besieged,  a  pint  of  dove's  dung  was  worth  five 
pieces  of  silver.  A  bow-shot  away,  outside  the  walls, 
it  not  only  was  worth  nothing,  but  its  possession  meant 
defilement.  Value,  whether  appreciable  or  inappreci- 
able, depends  wholly  upon  the  relation  of  the  individual 
to  the  thing  to  which  value  is  attributed. 

The  trouble  with  many  of  the  definitions  of  value 
which  are  used  by  economic  writers  is  that  they  are 
attempts  to  define  or  limit  the  origin  or  source  of  values, 
rather  than  to  make  clear  the  real  nature  of  the  concept. 
Thus,  some  have  endeavored  to  maintain  that  all  appre- 
ciable values  are  the  result  of  labor  or  depend  upon  the 
utility  of  the  objects  to  which  value  is  attributed.  Such 
definitions,  coming  afterwards  to  be  used  as  premises, 
have  led  not  only  to  confusion  but  to  infinite  mischief 
in  economic  speculation. 

Appreciable  values  are  expressed  either  by  compari- 
son of  one  specific  value  with  another  or  in  terms  of 
some  fixed  and  generally  accepted  system  of  equiva- 
lency. The  former  is  called  barter  ;  the  latter  trade  or 
exchange. 

Money  is  any  graduated  system  of  equivalency  estab- 
lished by  law  and  represented  in  whole  or  in  part  by 
visible  symbols  provided  by  law,  which  are  used  in  ordi- 
nary exchange  at  their  prescribed  equivalency  and  re- 
ceivable at  that  rate  in  payment  of  debts. 


76  "  VALUE,"  "  EQUIVALENCY,     ETC. 

A  monetary  system,  is  composed  of  two  elements  : 
(i)  A  legally  established  denominational  scale  of  ab- 
stract equivalencies  ;  (2)  legally  prescribed  material 
symbols  representing  some  or  all  the  denominations  of 
such  graduated  scale. 

Money  is  of  two  kinds  :  Coin  and  credit-money. 

Coins  are  portions  of  precious  metal,  of  prescribed 
weight,  form,  and  fineness,  the  values  of  which  are  legally 
declared  to  be  equivalent  to  specific  denominations  of 
any  particular  monetary  system,  the  weight  of  the  vari- 
ous coins  being  determined  by  a  unit  of  equivalency  and 
all  other  coins  of  the  same  material  being  multiples  or 
fractions  of  its  weight  and  of  the  same  fineness  or  an 
equivalent  alloy.  The  unit  of  equivalency  is  sometimes 
termed  the  "  standard  of  value  ";  it  is  really  the  standard 
of  equivalency  only.  Money  does  not  fix  or  determine 
values,  but  expresses  them  when  fixed  in  the  mind  of 
buyer  or  seller. 

The  value  of  all  money  is  regulated  by  the  general 
desirability  of  the  metal  of  which  the  symbol  represent- 
ing the  unit  of  equivalency  is  composed,  and  this  value 
varies  with  the  relation  which  the  demand  for  this  metal 
bears  to  the  supply  of  coin-metal,  as  we  have  already 
seen. 

What  is  termed  a  double-standard  or  a  h'metatfit-&t&nd- 
ard  is  a  monetary  system  in  which  specific  amounts  of 
two  metals  are  legally  declared  to  be  equal  to  each 
other  in  value  and  of  like  equivalency.  The  differ- 
ence in  the  weight  of  the  two  symbols  representing  the 


"  VALUE,"  "  EQUIVALENCY/'  ETC.  77 

unit  of  equivalency  in  such  a  system  is  said  to  be  the 
ratio  of  equivalency  of  the  two  metals.  If  the  one  symbol 
is  sixteen  times  heavier  than  the  other  having  the  same 
equivalency,  the  ratio  is  16  to  i.  When  the  value,  that 
is,  the  general  desirability  of  the  metal  composing  one 
of  the  units  of  equivalency  in  such  a  monetary  sys- 
tem, comes  to  exceed  that  of  the  other,  the  most  val- 
uable coinage  ceases  to  be  regarded  as  money,  and 
becomes  a  commodity.  Its  equivalency  remains  the  same, 
being  determined  by  law,  so  that  it  will  only  pay  the 
same  amount  of  debt,  if  used  as  money  ;  but  its  value 
or  general  desirability  being  greater  than  that  of  its  co- 
ordinate symbol,  it  will  buy  more  if  used  in  exchange. 
So  the  man  who  has  it  will  sell  it  as  he  would  any  other 
commodity,  and  pay  his  debts  with  the  less  valuable 
symbol.  This  is  what  is  meant  by  "  Gresham's  Law," 
as  it  is  termed,  that  "  poor  money  drives  out  good 
money."  A  difference  in  the  value  of  coins  of  the  same 
equivalency  reduces  the  unit  of  equivalency  to  the  value 
of  the  least  desirable,  and  by  making  the  more  desirable 
symbol  a  commodity  drives  it  out  of  circulation  as 
money. 

Credit-money  is  any  system  of  denominational  promises 
to  pay  coin,  regulated  by  law,  which  are  legal-tenders  for 
any  debt  not  specifically  stated  to  be  payable  in  some 
other  form  of  currency.  It  is  of  two  kinds — (i)  that 
issued  by  a  government  itself  ;  (2)  that  issued  by  a  bank 
to  which  the  authority  to  emit  notes  having  the  legal- 
tender  quality  has  been  granted  by  a  government  as  a 


78  "  VALUE,"  "  EQUIVALENCY,"  ETC. 

profitable  concession.  The  United  States  notes  (green- 
backs) and  the  treasury-notes  of  1890  are  examples  of 
the  former  class  ;  the  notes  of  the  Bank  of  England,  the 
Bank  of  France,  the  Imperial  Bank  of  Germany,  and  the 
national  banks  of  Sweden,  Norway,  and  some  other 
countries,  are  examples  of  the  second. 

Substitute-money  is  any  system  of  legally  regulated 
promises  to  pay  coin,  or  some  legal  equivalent,  which 
circulates  by  common  consent  but  is  not  a  legal-tender 
for  debts.  This  is  the  ordinary  status  of  what  is  called 
"  bank-currency."  The  great  trouble  with  it  is  that  it 
fails  to  serve  the  purposes  of  money  when  most  needed  ; 
it  is  accepted  in  payment  of  debts  when  times  are  good 
and  refused  as  soon  as  they  become  bad.  The  notes 
of  our  National  banks  belong,  technically,  in  this 
class, — but,  as  they  are  payable  in  coin  or  legal-tender 
promises  of  the  United  States,  and  these  legal-tenders  are 
redeemable  in  gold,  they  are  really  equivalent  to  legal- 
tender  of  the  government. 

Token-money  is  an  apparent  exception  to  the  defini- 
tions above  given.  It  consists  of  coins  having  little  or  no 
intrinsic  value,  which  are  used  to  represent  fractions  of 
the  unit  of  equivalency  too  small  to  be  represented  by 
coins  made  of  precious  metals.  They  are  kept  in  circu- 
lation by  the  necessity  that  exists  for  small  change,  by 
limitation  of  amount,  by  restriction  of  use  or  limited 
legal-tender  quality,  and  by  the  fact  that  each  person's 
interest  in  their  purchasing  power,  whether  it  be  more  or 
less,  is  so  small  as  to  be  of  little  consequence. 


"  VALUE,"  "  EQUIVALENCY/'  ETC.  79 

Currency  is  a  term  used  to  include  all  forms  of  money 
and  all  denominational  promises  to  pay  money.  Its  use 
as  a  synonym  of  money  alone,  has  led  to  some  confusion 
in  popular  thought.  The  use  of  the  terms  "  paper-money  " 
and  "  paper-currency  "  have  tended  to  increase  this  con- 
fusion of  thought  by  diverting  attention  from  the  real 
element  of  value,  which  is,  in  all  cases,  the  value  of  the 
promise  to  pay.  The  equivalency  of  coin  and  credit-money 
is  the  same,  but  the  value  of  the  former  depends  on  the 
desirability  of  the  material  of  which  it  is  composed, 
while  the  value  of  the  latter  depends  on  the  reliability  of 
the  promise  of  which  it  consists  :  the  value  of  the  mate- 
rial on  which  it  may  be  impressed  has  nothing  to  do 
with  it. 

Ciedit-turrcnty  has  been  an  important  instrument  of 
exchange  ever  since  the  establishment  of  banks  of  issue  ; 
credit-money  has  become  an  important  element  of  cur- 
rency only  since  the  grant  of  legal-tender  quality  to 
Bank  of  England  notes  sixty  years  ago,  to  the  notes  of 
the  Bank  of  France  a  few  years  later,  to  the  demand- 
notes  of  the  United  States  in  1862,  and  to  the  issues  of 
several  of  the  banks  of  other  European  nations  since 
that  time. 

Thus  far,  our  credit-money  has  consisted  of  the  prom- 
ise of  the  government  to  pay  coin  on  demand.  This  the 
government  has  properly  and  wisely  construed  to  be  a 
promise  to  pay  gold  when  the  holder  preferred  it  to  sil- 
ver. The  abandonment  of  the  policy  of  requiring  cus- 
toms duties  to  be  paid  in  gold,  left  the  Treasury  without 


80  "  VALUE,'*  "  EQUIVALENCY,"  ETC. 

means  to  secure  gold  coin  to  meet  this  demand,  except 
by  issuing  bonds  and  selling  them  for  gold.  By  this 
means  the  bonded  debt  has  been  already  increased 
$262,000,000,  with  an  existing  deficiency  approximating 
$40,000,000  more.  This  amount  at  four  per  cent,  inter- 
est, the  bonds  having  thirty  years  to  run,  represents  an 
increase  of  the  annual  interest-charge  of  the  government 
of  $12,000,000,  amounting  in  thirty  years  to  $360,000,000 
in  gold  in  addition  to  the  principal  of  the  bond. 

This  process  seems  likely  to  continue  until  the  entire 
credit-currency  of  the  United  States  is  retired  from  cir- 
culation and  the  bonded  debt  proportionately  increased. 
The  amount  of  demand-currency  outstanding  July  i, 
1896,  amounted  to  $352,508,000,  the  interest  on  which 
would  be  in  four  per  cent,  bonds,  $14,000,000  a  year, 
which  in  thirty  years  would  amount  to  $420,000,000. 
To  this  should  properly  be  added  the  outstanding  silver- 
certificates,  amounting  to  $331,259,000  more,  making  the 
whole  principal  $584,000,000. 

Two  methods  have  been  proposed  for  obviating  the 
evils  of  our  present  monetary  system  : 

(i)  The  unrestricted  coinage  of  silver  on  private  ac- 
count, which  would  at  once  place  the  whole  demand- 
currency  of  the  United  States  on  a  silver  basis,  and 
reduce  the  purchasing  power  of  the  same  47  per 
cent.  As  this  constitutes  more  than  one  half  of  the 
money  actually  in  use  in  business  at  this  time,  this 
would  mean  a  loss  in  purchasing  power  of  nearly  one 
half  in  more  than  half  the  money  the  people  hold.  The 


"  VALUE/'  "  EQUIVALENCY,"  ETC.  8l 

loss  would  fall,  of  course,  most  heavily  on  the  poorer 
classes,  to  whom  their  little  store  on  hand  is  like  the 
widow's  mite — all  that  they  have.  It  is  a  proposition 
hardly  paralleled  for  cold-blooded  injustice  in  all  the 
world's  history. 

(2)  The  alternative  proposition,  in  the  several  forms 
in  which  it  has  been  stated,  is  to  extend  or  modify  our 
present  system  of  National  Banks,  giving  them  a 
monopoly,  actual  or  resultant,  of  the  issue  of  credit- 
currency,  to  be  based  on  bonds  of  the  United  States, 
and  their  ultimate  redemption  to  be  guaranteed  by  the 
United  States.. 

This  is  infinitely  preferable  to  the  other,  but  is  open 
to  the  objection  of  cost,  already  pointed  out,  and  certain 
other  objections  which  imperatively  suggest  the  inquiry 
whether  a  better  and  cheaper  method  is  not  possible, 
and  whether,  under  existing  conditions  at  least,  it  is  not 
preferable.  This  consideration  has  induced  the  formu- 
lation of  the  plan  set  forth  in  the  next  chapter. 

6 


XI. 

NATIONAL  CURRENCY   AND   NATIONAL  CREDIT. 

IN  all  civilized  countries  the  relation  between  national 
credit  and  national  currency  is  one  of  constantly  in- 
creasing intimacy  and  importance.  Indeed,  it  may  be 
truthfully  said  that  the  financial  and  monetary  progress 
of  the  last  fifty  years,  which  has  been  much  greater  than 
was  made  in  centuries  before,  has  been  mainly  along  the 
line  of  increased  use  and  greater  certainty  of  private 
credit  and  the  perfection  of  public  credit,  especially  by 
the  reduction  of  the  rate  of  interest  on  national  indebt- 
edness and  its  employment  to  supplement  coinage  as  an 
essential  element  of  national  currency.  No  one  influ- 
ence has  tended  so  steadily  and  strongly  to  appreciate 
the  public  credit  of  the  leading  nations  of  the  world  and 
to  promote  the  stability  of  their  respective  currencies  as 
the  intimate  and  vital  relations  that  have  been  estab- 
lished between  the  two,  and  in  nothing  else  is  the  finan- 
cial and  monetary  progress  of  the  age  so  clearly  apparent 
as  in  the  development  and  extension  of  these  relations. 

The  chief  element  in  this  remarkable  improvement 
in  monetary  methods  has  been  the  substitution  of  actual 
credit-money  having  full  legal-tender  quality,  for  substi- 

82 


NATIONAL  CURRENCY  AND   NATIONAL  CREDIT.      83 

fute-money  or  a  banking-currency  having  no  adequate 
basis  of  stability,  but  dependent  on  accident  for  its  hold 
on  public  confidence,  subject  to  frequently  recurring 
waves  of  public  distrust,  and  always  proving  weakest 
and  most  variable  when  there  was  most  need  of  strength, 
uniformity,  and  stability.  This  movement  has  mani- 
fested itself  in  three  forms  :  (i)  In  the  grant  of  the  legal- 
tender  quality  to  the  notes  of  great  banking  institu- 
tions which  are  so  intimately  connected  with  their 
various  governments  as  really  to  constitute  an  integral 
part  of  their  financial  policies  and  administrative 
machinery.  One  hundred  and  twenty  years  ago  this 
very  year,  Adam  Smith  called  attention  to  the  fact  that 
the  Bank  of  England  was  something  more  than  a  great 
banking  corporation,  being,  in  fact,  a  most  essential  part 
of  the  government  itself.  How  close  and  indissolu- 
ble this  relation  was  even  then,  is  apparent  from  the 
wonder  and  perplexity  which  shows  in  his  attempt 
to  analyze  and  define  the  same.  But  the  direc- 
tors of  that  most  famous  of  all  financial  institutions 
would  have  been  stricken  dumb  with  amazement  if  they 
could  have  foreseen  the  strengthening  of  the  bond  that 
now  unites  the  "  Old  Lady  of  Threadneedle  Street  "  with 
the  destinies  of  the  British  Empire,  to  the  evident  and  in- 
estimable advantage  of  both.  This  closer  union  resulted 
chiefly  from  the  act  of  1832,  by  which  her  control  of  the 
fiscal  resources  of  the  realm  was  greatly  extended  and  her 
issues  were  made  a  legal-tender  for  all  debts  public  and 
private.  By  the  act  of  1844  this  fiscal  union  was  made 


84     NATIONAL  CURRENCY   AND  NATIONAL  CREDIT. 

more  complete  by  absolute  control  of  receipts  and  ex- 
penditures of  the  government  and  the  entire  administra- 
tion of  the  public  debt.  The  revenues  and  the  credit  of 
the  Empire  are  practically  in  her  control,  and  $80,000,- 
ooo  of  her  issues  are  based  solely  on  the  public  credit. 
She  has  also  control  of  the  sinking-fund  of  the  govern- 
ment. Because  of  this,  she  is  the  Gibraltar  of  the  na- 
tion's credit  and  is  in  turn  sustained  by  it. 

In  France  the  same  course  has  been  pursued.  The 
issues  of  the  Bank  of  France  were  made  legal-tender  in 
1838,  and  her  fiscal  relations  with  the  government  are 
even  more  vital,  especially  since  1874,  no  other  banking 
institution  being  allowed  to  issue  denominational  notes. 
Germany  and  Austria,  Norway  and  Sweden  have  adopted 
substantially  the  same  policy.  The  result  is  an  unex- 
ampled stability  of  credit-currency.  In  the  United 
States  the  experiment  was  first  made  of  a  banking- 
system  based  on  the  credit  of  the  government  but  not 
legal-tender,  though  the  redemption  of  the  issues  is 
guaranteed  by  the  government. 

(2)  Here  too  has  been  tried  for  the  first  time  on  any 
great  scale,  the  experiment  of  a  legal-tender  currency 
issued  directly  by  the  government  and  redeemable  at  all 
times  on  demand  in  gold  coin;  or,  to  state  it  more  accu- 
rately, in  any  coin  of  the  realm  the  holder  chooses  to 
designate.  This  currency  has  been  subject  to  much 
criticism.  For  seventeen  years  it  was  objected  that  it 
was  not  redeemed  according  to  its  terms.  During  the 
past  three  years  it  has  been  made  evident  that  its  con- 


NATIONAL  CURRENCY   AND   NATIONAL  CREDIT.      85 

stant  redeemability  can  only  be  maintained  by  a  con- 
stant increase  of  the  bonded  debt  in  order  to  secure 
gold  to  meet  such  demand.  The  result  has  been  vexa- 
tious, unsatisfactory,  and  costly,  as  we  have  already 
shown.  This  experience  inclines  one,  naturally,  to  in- 
quire why  the  issue  of  a  legal-tender  credit-currency 
under  authority  of  government  and  based  largely  on 
its  credit,  which  has  proved  the  sheet-anchor  of  stability 
in  other  countries  when  made  indirectly  by  a  fiscal 
agent  of  the  government,  should  have  failed  here  when 
made  directly  by  the  government  itself. 

In  considering  the  reasons  for  this  difference,  we  are 
confronted  at  the  outset  with  the  astonishing  fact  that 
through  all  the  unprecedented  monetary  conditions  of 
the  last  quarter  of  a  century  the  terminal-credit  of  the 
country — that  is,  its  interest-bearing  obligations  having 
a  specific  term  and  payable  in  gold — have  been  worth 
more  than  gold  from  the  day  of  issue  to  the  day  of  pay- 
ment. Considered  by  itself  this  result  is  not  remarkable. 
In  the  first  place,  they  are  payable  in  that  money  which 
thus  far  in  the  world's  history  has  shown  the  least  depre- 
ciation, to  wit :  gold.  In  the  next  place,  the  resources 
of  the  United  States  exceed  those  of  any  other  gov- 
ernment, and  have  not  been  depleted  by  long-continued 
exhausting  demands.  And  in  the  third  place,  the 
United  States  has  established  a  reputation  as  a  debt- 
paying  nation  unparalleled  by  any  other  country. 
Others  have  refunded  greater  sums  and  braced  their 
credit  with  those  visible  appeals  to  public  confidence 


86     NATIONAL  CURRENCY  AND  NATIONAL  CREDIT. 

known  as  sinking-funds  of  one  sort  and  another,  to  a 
greater  degree,  but  none  has  such  a  magnificent  record 
of  debt  actually  paid  off  and  discharged  within  a  like 
period  by  the  actual  application  of  surplus  revenues, 
alone.  At  the  risk  of  wearying  the  reader,  there  is 
appended  here  what  it  was  the  author's  fixed  purpose  to 
avoid  in  this  work — a  table.  He  believes  that,  as  a 
rule,  statistical  tables  lead  to  confusion  and  weariness 
of  the  ordinary  reader.  They  are  the  armories  from 
which  the  student  of  social  and  economic  problems 
draws  his  facts,  but  the  duty  of  the  economic  writer  who 
addresses  himself  to  a  popular  audience  is  usually  to  use 
these  facts  rather  than  invite  his  readers  to  inspect  the 
magazines  from  which  they  are  drawn.  This  record  is 
such  an  incredible  one,  so  well  deserving  universal  con- 
sideration as  a  sound  basis  of  patriotic  pride,  that  an 
exception  is  gladly  made  in  its  favor.  It  ought  to  be 
made  an  object-lesson  in  every  school-house  in  the  land, 
to  impress  on  the  minds  of  coming  generations  the  essen- 
tial honesty  of  the  American  people  and  their  manly 
restiveness  under  the  burden  of  obligation  to  those  who 
lent  a  helping  hand  in  the  hour  of  the  country's  sorest 
need. 


NATIONAL  CURRENCY  AND  NATIONAL  CREDIT.      87 
A  QUARTER.  CENTURY  OF  DEBT-PAYING. 


TOTAL  INTEREST-BEARING 
DEBT. 

ANNUAL  INTEREST- 
CHARGE 

1860  . 

$2  162  060  H22  30 

$I2^,t(23,QQ8  34 

1870.  . 

2.O4.6  4HH.722  3Q 

118.784,060  34 

1871  .  , 

1.  034.606.  7  so  oo 

111,040,330  Ho 

1872  .  . 

1.814.704,100  oo 

103,088,463  oo 

1873  

i.  710,483,  QHo  oo 

08,040,804  oo 

1874 

i  738  Q3O  7Ho  oo 

08  706.004  «;o 

1871;  .  , 

I  722  676  3OO  OO 

06.8^^.600  <;o 

1876  . 

i  710  68n  4Ho  oo 

o?,  104.260  oo 

1877.  . 

i  711,888,500  oo 

03,160,643  t;o 

1878.  . 

I  704.7  3H.6HO  OO 

04,6^4,472  «Jo 

1870 

I  7Q7  64"?  7OO  OO 

83  773  778  5O 

1880  

I  723  003  IOO  OO 

70  633  081  oo 

!88i  

I  63Q  H67  7HO  OO 

7^.018.601;  HO 

1882  

*j  oVO"  /  )  /  Jv 

i  46"?  810  400  oo 

H7.3OO.IIO  7H 

188-?.  . 

I  338.220.!  HO  OO 

HI.436.7OQ  HO 

1884  

i.226.H63.8Ho  oo 

47,026,432  HO 

1885  
1886  . 

1,196,150,950  oo 
i  146  014  100  oo 

47>°I4,i33  oo 
4H  H  IO  008  OO 

1887 

I  O2I  602  3HO  OO 

4I.78O  H2Q  OO 

1888  

QHO  522  Hoo  oo 

38.001.  Q3H  2H 

1880.  . 

820  8H3  QOO  oo 

33.7H2.3H4  60 

1800.  . 

72H.3I3.HO  OO 

20.4I7.6O3  IH 

1801.  .  .  , 

610  529,120  oo 

23,6lH.7^H  80 

1802.  . 

H8H.02Q  330  00 

22,80.3,88.3  20 

What  are  the  central  facts  of  this  record?  $1,577,- 
031,192.39  of  public  debt  paid  off,  cancelled,  and  wiped 
out  in  twenty-four  consecutive  years  !  An  average  of 
more  than  $65,000,000  each  year  !  Also  a  reduction  of 
the  yearly  interest-charge  in  that  time  of  $102,630,115.14, 
or  an  average  of  $4,276,254  a  year.  No  wonder  the 


88      NATIONAL  CURRENCY  AND   NATIONAL  CREDIT. 

world  wants  our  bonds  and  is  willing  to  pay  a  premium 
for  them  ! 

But  in  the  face  of  this,  why  is  it  that  our  demand-notes 
have  given  us  so  much  trouble?  In  what  respect  do 
they  differ  from  our  bonds  ?  In  just  three  things  : 

i. — They  are  constantly  demandable,  instead  of  being 
payable  at  a  particular  time. 

2. — They  do  not  bear  interest. 

3. — They  are  a  legal-tender  for  debts,  while  the  bonds 
are  not. 

.  It  is  evident  that  the  last-named  element  of  difference 
cannot  exert  any  depreciating  influence,  but  rather  the 
reverse  ;  an  interest-bearing-bond  having  a  specific  time 
to  run  or  payable  at  a  fixed  date,  would  be  enhanced 
rather  than  deteriorated  by  having  the  legal-tender 
quality  attached  to  it.  The  second,  the  fact  that  they 
are  not  interest-bearing  obligations,  is  an  evident  reason 
why  they  should  rank  in  desirability  below  those  that 
are  ;  but  it  is  not  a  sufficient  reason  why  the  promise  of 
so  abundantly  ^solvent  a  debtor  should  be  so  eagerly 
exchanged  for  gold  which  is  also  non-interest-bearing. 
Is  there  anything  in  the  nature  of  the  demand-notes  or 
the  conditions  of  the  times  that  will  explain  this  fact  ? 

There  are  certain  facts  which  not  only  fully  explain 
this  variance,  but  the  mere  statement  of  which  itself 
makes  evident  that  it  should  exist :  (i)  The  fact  of  con- 
stant redeemability.  The  whole  world  has  an  instinc- 
tive perception  of  the  falsity  of  this  theory.  (2)  The 
fact  that  since  the  abandonment  of  the  policy  of  having 


NATIONAL  CURRENCY  AND   NATIONAL  CREDIT.      89 

import  duties  paid  in  gold,  it  has  been  evident  that 
there  is  no  legal  provision  for  maintaining  the  gold 
reserve  to  meet  even  an  ordinary  demand  except  by 
borrowing  or  rather  buying  gold.  (3)  The  world  has 
taken  note  of  our  prolonged  and  remarkably  variegated 
struggle  to  preserve  the  parity  of  silver  coin  with  gold 
at  the  ratio  of  sixteen  to  one  and  compel  the  use  of  a 
large  silver-coinage  as  currency  under  those  conditions. 
(4)  The  world  knows  that  while  a  nation  with  such  a 
record  for  debt-paying  as  ours  would  never  default  in 
the  interest,  or  fail  to  provide  for  paying  the  principal 
of  its  bonds,  the  infatuation  for  a  particular  monetary 
theory  might  possibly  lead  it  to  attempt  the  dangerous 
and  absurd  experiment  of  paying  in  a  depreciated  coin- 
age a  demand-obligation  in  which  the  form  of  the  cur- 
rency to  be  used  in  its  redemption  was  not  specifically 
stated. 

Because  of  these  things,  the  demand-obligations  of 
the  government  have  been  well  designated  "  an  endless 
chain,"  the  constant  use  of  which  is  to  draw  gold  from 
the  Treasury  which  can  only  be  replenished  by  new 
loans. 

This  tendency  to  exchange  our  legal-tender  notes  for 
gold  has  been  greatly  strengthened  by  a  just  apprehen- 
sion on  the  part  of  the  obligors  in  maturing  gold-con- 
tracts that  complications  are  likely  to  arise  which  might 
render  it  difficult  to  obtain  gold  to  meet  such  obligations, 
and,  also,  by  the  just  and  proper  caution  on  the  part  of 
managers  of  institutions  which  are  required  to  keep  an 


90     NATIONAL  CURRENCY  AND   NATIONAL  CREDIT. 

available  reserve  fund — such  as  banks,  insurance  and 
trust  companies — who,  while  entertaining  perhaps  no  seri- 
ous doubt  of  the  ultimate  redemption  of  the  govern- 
ment's promises  to  pay,  clearly  perceive  the  difficulty  of 
maintaining  the  continuous  redeemability  of  our  de- 
mand-notes, and  deem  it  the  part  of  wisdom  as  trustees 
of  great  interests  to  reduce  their  holdings  of  legal-tender 
credit-money  and  increase  their  reserve  of  gold.  Under 
the  circumstances,  this  was  an  act  of  common  prudence 
and  discretion  on  the  part  of  both  these  classes.  The  re- 
sult has  been,  while  greatly  stimulating  the  demand  for 
gold,  to  wholly  withdraw  the  same  from  circulation,  so 
that  the  entire  stock  of  gold  in  the  country  at  this  time  is 
held  either  as  reserves  of  this  sort,  to  meet  possible  con- 
tingencies of  gold-debtors,  or  in  anticipation  of  specula- 
tive opportunity  to  arise  from  possible  further  impairment 
of  our  currency  by  free-silver  agitation.  This  situation 
has  been  very  properly  pronounced  unbearable.  No 
honest  man  of  sincere  patriotism  desires  it  to  continue. 
The  result  of  all  these  conditions  has  been  to  create 
three  distinct  phases  of  public  sentiment  in  regard  to 
our  future  monetary  policy. 

The  restriction  of  the  circulation  by  the  retirement 
of  gold  and  the  depression  caused  by  the  attempt  to 
sustain  the  parity  of  silver  by  putting  the  government's 
credit  behind  our  silver-coinage  through  an  immense 
certification  of  it,  intensified  by  the  restriction  of  pro- 
duction by  apprehended  and  actual  tariff  modifications, 
has  created  a  widespread  conviction  that  the  great  need 


NATIONAL  CURRENCY  AND   NATIONAL  CREDIT.      9 1 

of  the  present  time  is  more  money — and  immediate  and 
decided  increase  of  the  currency — which  it  is  hoped 
would  result  in  stimulating  enterprise  and  enlarging  the 
field  of  profitable  production,  increase  the  demand  for 
labor,  raise  the  rate  of  wages,  and,  by  these  means  if  not 
otherwise,  enable  the  debtor  more  easily  to  discharge  his 
obligations.  To  this  element  of  our  people  a  lack  of 
sufficient  currency  seems  the  chief  evil  of  our  present 
monetary  conditions,  and  they  are  willing  to  run  the  risk 
of  a  depreciated  currency  to  remedy  it.  This  is  the 
position,  fairly  stated,  of  the  great  majority  of  those  who 
propose  as  a  remedy  the  unrestricted  coinage  of  silver. 
More  money  and  cheaper  money,  even  at  the  risk  of  de- 
terioration in  its  quality,  is  the  position  they  occupy  in 
regard  to  our  currency. 

Another  class,  more  conservative  and  cautious,  but 
not  less  sincere  and  patriotic,  believing  that  stability  and 
uniformity  of  value  and  equivalency  between  all  parts 
of  our  currency  is  the  matter  of  prime  importance,  de- 
mand as  a  first  step  the  retirement  of  our  entire 
credit-currency  by  the  immediate  issue  of  bonds,  leav- 
ing the  future  situation  to  take  care  of  itself. 

Another  class,  recognizing  the  inconsistency  of  de- 
manding the  retirement  of  $600,000,000  of  credit- 
currency,  which  constitutes  more  than  half — probably 
two-thirds — of  the  actual  circulation  since  the  with- 
drawal or  occlusion  of  gold,  without  proposing  some 
feasible  method  for  readily  supplying  the  place  of  the 
same,  while  joining  in  the  demand  for  the  retirement  of 


£2      NATIONAL   CURRENCY   AND   NATIONAL  CREDIT. 

our  credit-currency,  propose  the  establishment  of  some 
system  of  banks  of  issue,  the  notes  of  which  shall  be 
based  wholly  or  in  part  upon  the  credit  of  the  govern- 
ment and  their  redemption  guaranteed  by  it,  but  without 
legal-tender  quality. 

This  latter  proposition  is  sure  to  encounter  serious 
opposition.  The  temper  of  the  popular  mind  in  regard 
to  the  predominant  power  of  corporations,  trusts,  and 
similar  aggregations  of  capital  in  shaping  our  political, 
financial,  and  industrial  conditions,  would  inevitably 
take  alarm  at  the  prospect  of  putting  the  entire  credit- 
currency  of  the  country  in  the  control  of  a  system  of 
banking  institutions  which,  by  concerted  action,  would 
have  the  power  to  increase  or  diminish  the  supply,  to 
raise  the  rate  of  interest,  and,  in  short,  as  was  charged 
against  the  old  United  States  Bank,  "to  kill  and  make 
alive,  to  destroy  whom  they  wished  to  render  powerless, 
and  to  uphold  whom  they  desired  to  see  prosper."  It 
is  a  matter  for  serious  consideration  whether  such  a 
course,  imposing  as  it  inevitably  would  a  great  increase 
of  taxation,  would  not  greatly  inflame  the  already  dan- 
gerously popular  sentiment  that  there  is  an  "  irre- 
pressible conflict "  between  the  rich  and  poor  in  this 
country.  There  is  no  doubt  that  the  "  greenback,"  in 
its  thirty-four  years  of  existence  as  an  important  part 
of  our  currency,  has  made  a  very  deep  and  favorable 
impression  on  the  public  mind,  and  the  demand  that  the 
government  shall  supply  a  sufficient  currency  without 
the  intervention  of  any  system  of  banks  of  issue  is  by 


NATIONAL   CURRENCY   AND   NATIONAL  CREDIT.      93 

no  means  restricted  within  party  lines.  The  only 
question  to  be  decided  is  whether  such  a  currency  is 
compatible  with  stability  and  uniformity  of  value,  and 
can  be  made  secure  from  dangerous  fluctuations.  These 
facts  are  confidently  relied  upon  as  excuse  for  the 
suggestion  offered  in  the  next  chapter. 

Credit  is  a  not  less  important  instrument  of  exchange 
than  money.  It  is  said  that  more  than  nine-tenths,  per- 
haps ninety-nine  hundredths,  of  the  monetary  transac- 
tions of  the  country  are  effected,  somewhere  in  the 
course  of  their  development,  with  this  element.  Its 
actual  extent  can  never  be  determined.  It  is  the  prod- 
uct of  confidence  ;  expands  with  prosperity  and  shrinks 
with  depression.  The  contraction  of  credit  produces 
the  impression  of  a  scarcity  of  money,  even  when  there 
has  been  no  change  whatever  in  the  volume  of  cur- 
rency. Credit  is  of  two  kinds,  terminal  and  demandable. 
Terminal  credit  is  any  form  of  obligation  that  is  payable 
at  a  certain  time  ;  demandable  credit  is  that  which  is 
payable  at  the  call  of  the  creditor.  Credit  is  also,  as  to 
its  character,  interest-bearing  and  non-interest-bearing. 
As  an  element  of  the  currency,  credit  has  been  used 
chiefly  in  the  form  of  non-interest-bearing  denomina- 
tional demand-notes.  These  may  be  either  legal-tender 
or  not.  The  United  States  notes  and  treasury-notes  of 
1890  are  legal-tenders,  the  currency  and  silver-certifi- 
cates are  not.  All  are  demand-obligations,  however, 
and  are  therefore  subject  to  the  distrust  which  naturally 
attaches  to  a  pledge  of  "  constant  redeemability  "  in  any 


94      NATIONAL  CURRENCY  AND   NATIONAL   CREDIT. 

specific  medium,  when  the  amount  of  the  medium  of 
redemption  evidently  falls  greatly  below  the  amount  of 
circulation  to  be  redeemed. 

"  Constant  redeemability  "  is  a  device  originally  intended, 
and  still  chiefly  used,  to  enhance  the  profits  of  banks  of 
issue.  It  consists  of  an  attempt  to  make  a  part  continu- 
ously equal  to  the  whole.  It  depends  upon  the  theory 
that  bank-notes,  or  credit-currency  of  any  sort,  to  a  spe- 
cific amount,  having  once  been  put  in  circulation,  can 
be  kept  redeemable  on  presentation  by  holding  in  re- 
serve a  much  smaller  sum,  say  one-third  the  amount  of 
the  issue,  in  coin,  relying  on  the  skill  of  the  banker,  the 
accident  of  wide  dispersion  of  the  bills,  and  the  use  of 
deposits  to  make  good  whatever  demand  there  may  be 
at  any  particular  time  above  the  amount  of  this  reserve. 

The  principle  of  "  constant  redeemability  "  is  of  course 
fallacious,  as  even  a  child  may  see  at  a  glance.  In 
sporting  parlance  it  would  properly  be  termed  a  "  bluff." 

It  depends  for  its  success  wholly  on  the  impression 
made  on  the  popular  mind  by  an  apparent  ability  to 
comply  with  the  terms  of  the  vaunt.  If  the  power  to 
redeem  happens  to  outlast  a  particular  attack  of  public 
distrust,  well  and  good  ;  if  it  does  not,  the  crash  comes, 
the  public  loses,  and  the  old  see-saw  game  of  con- 
fidence and  panic  goes  on  again,  perhaps  with  new 
players,  but  in  the  same  way  and  always  with  the  same 
ultimate  result,  because  its  essential  element,  "  constant 
redeemability  "  is  a  constant  lie. 

The    danger   of   such   revulsions   has    been    greatly 


NATIONAL  CURRENCY  AND  NATIONAL  CREDIT.     95 

mitigated  by  the  grant  of  legal-tender  quality  to  the 
issues  of  those  great  banking  institutions  which  are 
really  a  part  of  the  governments  under  whose  authority 
they  act. 

When  a  government  promises  to  redeem  in  gold  an 
amount  of  credit-money  which  every  one  knows  it  has 
not  gold  enough  to  redeem  if  it  should  be  demanded,  it 
has  none  of  the  gambler's  advantage  which  enables  a 
bank  to  stand  up  to  its  "  bluff."  The  public  does  not 
know  the  actual  resources  of  a  bank — how  much  gold  it 
really  has  or  how  much  it  may  be  able  to  secure  while  it 
delays  the  demand  by  paying,  as  the  Bank  of  England 
sometimes  has  been  compelled  to  do,  forty  shillings  in 
silver  to  each  demandant ;  that  being  the  limit  within 
which  silver  is  a  legal  tender  in  Great  Britain.  Even 
with  that  advantage  and  the  support  of  the  powerful 
government  of  which  it  is  really  a  part,  and  on  whose 
securities  it  issues  legal-tender  notes  to  the  value 
of  about  $  100,000,000,  its  bullion  has  sometimes  been 
drawn  upon  almost  to  exhaustion,  and  but  for  the  aid  of 
the  Bank  of  France  it  must  have  closed  its  doors.  "  Con- 
stant redeemability "  is  a  confidence-game  in  which 
ignorance  of  a  bank's  actual  condition,  resources,  *and 
means  of  obtaining  temporary  assistance,  are  most 
important  elements. 

When  a  government,  especially  one  of  restricted 
powers  and  represented  by  officials  whose  powers  are 
not  only  strictly  defined  but  must  be  exercised  in  the 
glare  of  publicity,  attempts  to  play  this  game,  it  does  so 


96     NATIONAL  CURRENCY  AND  NATIONAL  CREDIT. 

at  an  evident  disadvantage.  It  is  like  playing  with  an 
antagonist  who  knows  one's  hand.  Everybody  is  aware 
just  how  much  gold  the  Treasury  holds  and  what  chance 
there  is  to  replenish  it.  So  the  pretence  of  "  constant- 
redeemability "  is  an  apparent  farce.  A  reserve  of 
$100,000,000  has  proved  insufficient  to  keep  $340,000,000 
of  greenbacks  in  circulation.  Again  and  again,  the 
holders  of  them  have  come  and  asked  for  gold.  Why  ? 
Not  because  the  credit  of  the  government  is  not  the 
best  in  the  world,  but  because  the  demand  for  gold 
everywhere — to  meet  gold-contracts  in  this  country  and 
to  serve  as  redemption-money  for  credit-currency  abroad 
— has  increased  its  desirability  beyond  that  represented  by 
the  treasury-notes  or  the  silver-certificates  for  which  it 
is  exchangeable. 

As  the  result  of  our  experiment  in  trying  to  keep  the 
desirability  of  41 2 \  grains  of  standard  silver  equal  to  25^ 
grains  of  standard  gold,  by  making  credit-currency  "  con- 
stantly redeemable  "  in  either  gold  or  silver  coin  at  the 
creditor's  option,  we  have  kept  an  average  of  about 
$130,000,000  of  gold  lying  idle  in  the  treasury  for  twenty 
years,  have  had  to  borrow  over  $260,000,000  more  at 
4  per  cent,  interest,  the  bonds  running  thirty  years,  and 
are  at  this  date  (August  i,  1896)  only  saved  from  entire 
depletion  of  the  Treasury  by  the  grace  of  a  syndicate  of 
foreign  bankers  and  domestic  capitalists  who  have 
"  agreed  to  protect  the  gold-reserve  in  the  Treasury  until 
after  the  election  !  " 

Truly,  the  situation  is  most  humiliating  and  shameful ! 
A  combination  of  capitalists  volunteering  to  hold  up  our 


NATIONAL  CURRENCY  AND  NATIONAL  CREDIT.      97 

national  credit  and  save  the  United  States  from  bank- 
ruptcy ! 

But  how  can  such  a  situation  be  remedied  ?  Not  by 
trying  to  increase  the  value — that  is,  let  it  be  remembered 
always,  the  desirability  of  our  silver  coins  by  increasing 
the  number  of  them  a  hundred  fold — but  by  applying  to 
our  credit-money  the  same  principle  which  makes  our 
bonds  at  this  very  moment  worth  fifteen  or  twenty  per 
cent,  more  than  gold.  It  is  enough  to  make  any  one 
laugh  who  can  refrain  from  tears,  to  see  a  great  nation, 
whose  promise  to  pay  gold  thirty  years  hence  is  worth 
one-fifth  more  than  its  face  in  gold  coin,  forced  to  solicit 
individuals  to  help  us  make  good  our  boasts  of  "  constant 
redeemability  "  and  "parity  of  value  "  between  our  gold  and 
silver  coinage  !  It  is  the  self-evident  absurdity  of  such 
claims  which  inclines  men  to  accept  almost  any  proposal, 
no  matter  how  ridiculous  it  may  be,  that  shall  promise  a 
remedy.  One  does  not  need  to  be  a  financier,  nor  even 
to  have  studied  the  currency  question  very  profoundly, 
to  understand  that  a  man,  a  corporation,  or  a  country, 
whose  terminal- credit  sells  in  the  world's  market  at  from 
twelve  to  twenty  per  cent,  above  par,  can  only  be  in  such 
straits  as  the  Treasury  now  is  with  regard  to  its  demand- 
promises,  from  two  causes  : 

1.  Failure  to  provide  means  by  which  to  obtain  gold 
to  meet  them  without  borrowing  ;  or, 

2.  Failure  to  employ  the  same  or  similar  means  to  en- 
hance their  desirability  as  have  been  used  to  maintain  its 
terminal-cit&it. 


XII. 
TERMINAL   LEGAL-TENDER  CREDIT-MONEY. 

Is  it  possible  to  give  to  our  credit-currency  the  same 
desirability,  in  character  if  not  in  degree,  that  now 
attaches  to  our  bonds  ?  If  it  is,  the  problems  of  our 
present  monetary  situation  are  readily  solved,  the  de- 
mand for  an  increase  of  the  currency  may  then  be 
safely  and  easily  met,  and  the  counter-demand  for 
stability,  elasticity,  and  uniformity  of  value  between 
all  its  elements  abundantly  satisfied. 

In  considering  this  question,  it  is  necessary  to  keep  in 
mind  these  facts  :  (i)  That  a  credit-currency  always 
maintains  an  exact  equivalency  with  the  coin  in  which 
it  is  payable,  so  long  as  the  credit  of  the  promisor  is 
good.  (2)  That  the  entire  debt  of  the  United  States — 
that  is,  the  sum  of  all  its  promises  to  pay — amounts  at 
this  time  to  about  $1,900,000,000.  Of  this  debt  about 
$900,000,000  bears  no  interest  and  consists,  in  the  main, 
of  demand-obligations  of  one  sort  and  another.  (3) 
That  the  retirement  of  the  demand-obligations  by  the 
issue  of  an  equivalent  amount  of  bonds  at  present  rates 
would  immensely  increase  the  interest-charge  of  the 
country.  (4)  That  if  the  same  can  be  safely  transmuted 
into  credit-currency,  it  will  at  once  relieve  the  gold- 

QS 


TERMINAL   LEGAL-TENDER   CREDIT-MONEY.      99 

reserve  and  save  the  interest  upon  at  least  $100,000,000 
idle  funds  which  we  have  had  to  pay  for  twenty  years  in 
and  to  maintain  our  pledge  to  perform  two  impossible 
things — viz.,  make  our  demand-notes  always  redeemable 
and  preserve  parity  of  value  between  our  coins.  (5) 
That  the  demand-obligations  constitute  a  debt  which 
must  be  paid  at  some  time  and  in  some  manner. 

If  it  is  possible  to  fund  our^demand-obligations  at 
one  per  cent,  and  at  the  same  time  transform  them  into 
a  stable  currency  always  equal  in  value  with  gold,  with- 
out any  modification  of  the  present  standard,  without 
risk  of  panic  or  depreciation  of  values,  but  on  the  con- 
trary with  an  assured  increase  of  confidence  and  result- 
ing stimulation  of  business,  it  is  surely  a  consummation 
devoutly  to  be  wished.  The  belief  that  all  this  is  not 
only  possible  but  very  easy  of  attainment  alone  induces 
the  author  to  submit  the  following  considerations  to  all 
who  are  not  so  blinded  by  the  conflict  between  two  ideas 
as  to  forget- that  the  ultimate  end  to  be  attained  is  not 
the  predominance  of  any  particular  theory,  but  the  ful- 
filment of  the  sentiment  recently  expressed  by  Mr. 
Chauncey  Depew  that  "  this  country  ought  to  have  the 
best  currency  in  the  world." 

If  the  free-coinage  of  silver  should  prevail,  our  cur- 
rency will  at  once  fall  to  the  level  of  the  worst  in  the 
world.  If  we  retire  the  demand-notes  and  supply  their 
place  with  a  bank-currency,  it  will  be  at  least  no  better 
than  other  nations  have.  Let  us  see  if  an  actually 
better  currency  is  not  attainable. 


IOO      TERMINAL   LEGAL-TENDER   CREDIT-MONEY. 

We  have  already  seen  that  the  disparity  between  our 
demand-obligations  and  our  termtnal-crtd.it  is  due  to  two 
things  :  (i)  the  fact  that  the  bonds  bear  interest  and 
(2)  that  one  has  greater  confidence  in  an  obligation  pay- 
able at  a  fixed  time  than  he  can  have  in  any  pledge  of 
"  constant-redeemability."  Suppose  now,  we  should  re- 
move this  disparity  by  changing  our  demand-obligations 
into  terminal,  interest-bearing,  denominational  issues  of 
a  like  amount  and  having  in  addition  thereto  the  legal- 
tender  quality. 

Or,  to  be  more  specific,  suppose  we  issue  denomina- 
tional legal-tender  currency  to  the  amount  of  our 
present  demand-obligations,  bearing  one  per  cent,  inter- 
est, renewable  with  payment  of  accrued  interest  in  gold 
coin  after  five  years,  dividing  the  same  into  five  classes, 
so  as  to  make  one-fifth  of  the  whole  renewable  each 
year,  and  making  a  certain  portion  of  the  whole,  say 
one-fiftieth^  redeemable  in  gold  each  year.  What  would 
be  the  result  ? 

The  legal-tender  quality  would  certainly  not  detract 
from  the  value  of  such  issues  regarded  as  terminal- 
credit  obligations. 

The  rate  of  interest  is  not  high  enough  in  connection 
with  the  short-term  limit,  five  years,  to  lead  them  to  be 
sought  as  speculative  investments  except  during  the  fifth 
year. 

They  would  become  especially  desirable  as  reserves 
for  insurance  companies,  trust-companies,  and  similar 
institutions,  instead  of  gold,  because  of  their  interest- 


TERMINAL   LEGAL-TENDER   CREDIT-MONEY.      IOl 

bearing  quality,  and  their  substitution  for  gold  would 
release  this  to  meet  existing  gold  contracts. 

The  holders  of  non-legal-tender  obligations  of  the 
government  would  prefer  them  because  of  their  legal- 
tender  quality. 

The  holders  of  all  our  non-interest-bearing  obligations 
would  prefer  them  because  they  would  bear  interest. 

It  would  at  once  eliminate  all  questions  concerning 
"  parity  of  value,"  except  as  regards  the  small  amount  of 
silver  coin  now  actually  in  circulation  and  the  coin  now 
in  the  Treasury.  This  could  very  safely  be  left  to  settle 
itself,  as  the  substitution  of  this  currency  would  call  in 
all  the  small  denominations  of  our  credit-money  and 
leave  the  field  of  small  change  to  be  filled  exclusively  by 
silver  according  to  the  intent  of  existing  laws. 

From  these  considerations  it  will  be  seen  that  the 
change  can  be  made  at  once,  without  compulsion  but  by 
direct  appeal  to  the  self-interest  of  holders  of  our  demand- 
obligations,  without  any  restriction  of  the  currency, 
without  any  possible  panic  or  stringency,  and  with  the 
consequences  of  making  our  whole  currency  immediately 
and  unquestionably  equal  with  gold. 

But  let  us  go  a  little  further.  All  this  constitutes  a 
debt  to  be  paid,  unless  after  a  time  it  should  be  decided 
to  continue  some  portion  of  it  as  a  permanent  loan  such  as 
other  nations'  debts  mostly  are.  Leaving  this  out  of  con- 
sideration for  the  present,  let  us  consider  how  the  gradual 
payment  of  the  debt  might  be  effected.  Suppose  we  say 
that  one-fiftieth  of  the  whole  amount  shall  be  paid  each 


102      TERMINAL  LEGAL-TENDER  CKEDIt-MONEV. 

year.  This  will  make  the  sum  that  may  be  demanded 
at  the  Treasury  each  year  consist  of  two  elements  :  (i) 
Interest  on  one-fifth  of  the  whole  amount  payable  in 
gold  coin.  (2)  One-fiftieth  of  the  whole  amount  of  prin- 
cipal payable  in  gold  coin. 

Suppose,  for  convenience  of  estimate  merely,  that  the 
whole  amount  was  one  billion  dollars.  One-fifth  of 
this  would  be  $200,000,000,  one  per  cent,  interest  on 
which  would  be  $2,000,000.  The  whole  amount  of  gold 
which  could  be  demanded  of  the  Treasury  in  any  year, 
under  this  system  then,  would  be  one-fiftieth  of  the 
principal,  $20,000,000,  and  interest  on  one-fifth  of  it, 
$2,000,000,  or  $22,000,000,  in  all.  The  "  endless  chain  " 
would  be  at  once  and  forever  broken. 

We  come  now  to  consider  the  question  of  cost.  The 
entire  cost  of  $1,000,000,000  of  such  currency  would 
amount  to  one  per  cent,  interest,  or  $10,000,000  a  year. 
This  is  the  exact  sum  the  government  has  to  pay  for  $250,- 
000,000  of  our  present  banking  currency  based  on  bonds 
at  four  per  cent.,  leaving  out  of  the  estimate  the  exemp- 
tion from  state  and  municipal  prevailing  taxation  under 
that  system.  In  other  words,  //  would  cost  considerably 
less  than  one-fourth  as  much  as  an  equivalent  amount  of 
banking  currency  based  on  bonds  like  our  national  bank-notes. 

It  would  seem  to  be  unnecessary  to  go  into  further  de- 
tail. Every  reader  can  make  his  own  estimates  as  to 
partial  or  continuing  operation  of  this  system.  The  ar- 
rangement of  the  classes  is  a  mere  matter  of  arithmetic. 
There  would  have  to  be  four  classes  of  one,  two,  three, 


TERMINAL  LEGAL-TENDER  CREDIT-MONEY.      103 

and  four  years'  term,  respectively,  at  first.  Afterwards 
they  would  be  regularly  one-fifth's,  renewable  each  year. 
To  transform  it  into  a  permanent  loan  it  would  only  be 
necessary  to  offer  the  holder  a  chance  to  renew  instead 
of  taking  payment  in  gold  for  one-fiftieth  each  year. 

Each  class  of  these  terminal  legal-tender  obligations 
would  have  to  bear  the  legend  "  Renewable  with  five  per 
cent,  accrued  interest  payable  in  gold  on  presentation 
after  January  ist  "  of  a  specified  year.  Those  of  each 
class  made  payable  at  the  same  time,  which  on  the  sched- 
ule proposed  would  be  one-tenth  of  each  class,  or  one 
fifthieth  of  the  whole,  would  have  the  legend  "  Payable 
in  gold  coin  with  five  per  cent,  accrued  interest  on  pre- 
sentation after  January  ist  "  of  a  specified  year. 

The  only  objections  thus  far  urged  to  such  a  plan  are, 
(i)  That  it  makes  no  provision  for  using  our  silver  prod- 
uct as  coinage.  The  same  objection  applies  to  all  our 
other  products  with  equal  force.  No  government  can  be 
required  to  purchase  any  class  of  products  because  there 
is  not  a  profitable  market  for  them  otherwise.  (2)  That 
a  credit-currency  can  only  be  kept  at  par  with  gold  by 
the  promise  of  "  constant  redeemability."  This  objec- 
tion should  need  no  answer  to  the  mind  of  every  candid 
and  intelligent  man. 

To  keep  our  demand-issues  on  a  par  with  gold  on  the 
theory  of  "  constant  redeemability,"  we  have  been  com- 
pelled to  keep  a  gold  reserve  of  $100,000,000  to  $197,000,- 
ooo  lying  idle  for  twenty  years.  Even  then  we  have 
failed  to  accomplish  that  result  and  been  obliged  to 


IO4     TERMINAL  LEGAL-TENDER  CREDIT-MONEY. 

borrow  nearly  $300,000,000  more  in  the  attempt.  This 
$100,000,000  gold  reserve  has  cost,  of  course,  the  interest 
on  that  sum,  and  the  amount  borrowed  shows  this  sum 
was  insufficient.  Suppose  we  assume  that  $150,000,000 
would  be  enough.  The  interest  on  this  at  four  per  cent, 
would  be  $6,000,000  a  year.  No  one  will  claim  that 
this  estimate  is  extravagant.  This  is  the  sum  that  must 
be  paid  on  the  theory  of  "  constant-demandability,"  to 
keep  our  credit-money  equal  in  desirability  with  gold. 
This  sum  alone  is  equal  to  the  cost  of  $600,000,000,  ter- 
minal-legal-tenders under  the  plan  proposed — a  greater 
amount  of  legal-tender  than  we  have  ever  had  in  circu- 
lation. 

The  ease  with  which  this  system  of  terminal  legal- 
tenders  may  be  substituted  for  the  bonded  debt  at  ma- 
turity is  another  feature  which  should  not  be  left  uncon- 
sidered.  By  giving  the  holders  of  maturing  bonds  the 
option  of  gold  or  this  terminal  legal-tender  credit-money 
it  would  be  easy  to  expand  the  currency  to  any  desirable 
limit  of  need. 

So  far  as  the  writer  is  able  to  perceive,  this  simple 
and  easily  made  change  in  our  currency  would  meet 
any  reasonable  demand  for  increase  of  volume  ;  would 
give  an  assurance  of  stability  that  would  at  once  restore 
confidence  ;  offers  the  easiest  possible  method  for  re- 
funding the  public  debt ;  secures  uniformity  of  value  in 
all  parts  of  our  currency  ;  would  be  the  cheapest  form  of 
credit-currency  ever  proposed,  and  would  secure  for 
the  country  what  Mr.  Depew  declared  that  every  patriot 
ought  to  desire,  "  the  best  currency  in  the  world." 


XIII. 
THE   RESULTS  OF   FREE-COINAGE  OF  SILVER. 

THERE  seems  to  be  in  most  of  the  works  on  this  sub- 
ject a  curious  lack  of  systematized  statement  of  the  im- 
mediate and  indubitable  results  of  the  free-coinage  of 
silver  upon  existing  conditions,  some  of  which  seem  to 
have  been  almost  wholly  overlooked.  The  most  impor- 
tant of  these  are  as  follows  : 

i.  It  is  not  to  be  denied  that  the  immediate  result 
would  be  to  depreciate  all  the  money  now  in  circulation, 
except  gold  coin  and  gold-certificates,  nearly  fifty  per 
cent.  It  matters  not  how  abundant  money  may  become 
or  how  easily  it  may  be  obtainable  hereafter,  one  thing 
is  beyond  all  question  :  the  very  day  that  the  free-coin- 
age of  silver  becomes  a  national  policy,  should  such  a 
day  ever  dawn,  the  man  who  goes  to  market  with  silver 
coin,  silver-certificates,  currency-certificates,  treasury- 
notes,  or  national  bank  currency  in  his  pocket,  will  find 
prices  doubled  and  the  purchasing  power  of  his  money 
only  half  what  it  now  is.  This  is  tantamount  to  depriv- 
ing the  present  holders  of  our  currency  of  one-half  its 
value.  As  all  these  forms  of  currency  amount  to  about 
one  billion  dollars,  one  sees  that  the  first  effect  of  such  a 

105 


IO6      THE   RESULTS   OF   FREE-COINAGE   OF   SILVER. 

policy  would  be  to  take  out  of  the  pockets  of  the  Ameri- 
can people  some  $500,000,000  before  a  single  silver  dollar 
could  be  coined. 

This  loss  would  fall  almost  entirely  upon  people  of 
small  means  to  whom  the  day's  or  week's  supply  of 
money  is  of  supreme  importance.  Between  the  day  of 
the  election  and  the  inauguration  of  a  "  silver  "  adminis- 
tration, credit  would  have  been  withdrawn,  and  all  peo- 
ple of  large  means  would  have  prepared  for  the  shock, 
and  be  found  with  little  money  save  gold  in  their  posses- 
sion. The  poor  and  those  of  moderate  means  would 
have  to  bear  the  shock  and  the  loss.  No  subsequent 
prosperity,  even  if  the  wildest  dreams  of  our  bimetallic 
visionaries  should  be  realized,  could  make  good  the  loss 
to  the  same  parties  ;  to  them  it  would  be  absolute  and 
irretrievable.  Every  man's  dollar  would  be  worth  only 
fifty  cents — the  other  half  would  be  lost. 

2.  Every  manufacturer  having  future  contracts  to  fill 
at  existing  prices,  that  is,  prices  based  on  the  present 
purchasing  power  of  the  currency,  would  be  hopelessly 
stricken.  While  labor  and  materials  would  at  once  ad- 
vance, the  prices  of  his  goods  already  contracted  for 
would  remain  the  same.  He  would  not  only  be  unable 
to  deliver  the  goods,  but  would  be  liable  to  an  action 
for  damages  for  failure  to  fulfil.  The  law  affords  no 
escape  from  such  misfortune.  This  would  destroy  a  very 
large  part  of  that  most  deserving  class,  the  small  manu- 
facturers, who  have  held  on  during  the  long  depression, 
"  hustling  "  for  contracts  even  with  the  narrowest  margin 


THE   RESULTS   OF  FREE-COINAGE  OF  SILVER.      ID? 

or  no  profit  at  all,  merely  to  keep  their  works  going, 
maintain  their  credit,  and  pay  their  work-people. 

3.  It  would  instantly  reduce  the  value  of  every  fire 
and  life  insurance  policy  in  the  country  and  require 
every  holder  of  a  policy  to  take  out  another  of  equal 
value  in  order  to  secure  equivalent  protection  for  his 
property  or  an  equal  value  for  the  beneficiaries  of  his 
forethought.     It  may  be  said  that  less  money  would  be 
required  to  effect  new  insurance,  but  the  probability  is 
that  companies  would  be  compelled  to  raise  their  rates 
to  a  gold  standard.      Besides  this,  in  many  cases  fur- 
ther insurance  is  impossible. 

4.  It  would  reduce  the  value  of  every  deposit  in  a 
savings  bank   or  any  other  banking   institution,  which 
would    at   once   become   payable  in  money  of  half  the 
purchasing  power  of  the  present,  thereby  reducing  the 
value  of  each  depositor's  account. 

5.  It  would  enable  the  national  banks  to  realize  on  all 
loans  a  profit  equal  to  half  their  circulation.     As  the 
bonds  deposited  to  secure  circulation    are   payable  in 
gold,  they  would  only  have  to  redeem  their  issues  in 
the  depreciated  currency,  release  their  bonds  and  go  out 
of  business,  to  realize  one-half  their  investment. 

6.  The  man   who    owes    another   a  debt  payable    in 
gold,  would  thereafter,  have  not  only  to  pay  the  actual 
difference  between  gold  and  silver,  but  the  commission 
of  the  broker   he   would   have   to   employ  to  procure 
it  for  him.     This  would  probably  not  be  less  than  a 
tenth  of  one  per  cent,  added  to  the  real  cost  of  exchange. 


IO8      THE   RESULTS  OF  FREE-COINAGE  OF  SILVER. 

As  all  the  bonds  of  states,  cities,  counties,  and  corpora- 
tions and  nearly  all  the  mortgages,  leases,  time  loans,  and 
bank  paper  of  the  country  are  now  payable  in  gold,  this 
would  be  a  notable  loss.  It  has  been  estimated  that 
we  have  more  than  twenty  billion  dollars  of  debt,  of  which 
at  least  three-fourths  is  on  gold-contracts.  Every  dollar 
of  this  would  be  enhanced  by  this  difference  in  value 
taken  out  of  the  debtor's  pocket  and  transferred  to  that 
of  the  trafficker  in  money. 

7.  The  debtor  whose  obligation  does  not  specify 
the  kind  of  currency  in  which  it  is  to  be  paid,  would,  of 
course,  be  benefited  by  the  advance  in  the  apparent 
value  of  what  he  possesses.  As  it  would  take  more  dol- 
lars to  represent  the  value  of  what  he  sold  and  his 
creditor  would  have  to  accept  them  at  their  present 
equivalency,  he  would  be  able  to  realize  about  half  his 
debt  by  such  depreciation.  If  we  leave  out  bank-ac- 
counts, savings-bank  deposits,  life  and  fire  insurance 
policies,  and  other  debts  of  this  character,  the  amount 
of  such  indebtedness  now  outstanding,  is  not  very  large, 
and  would  be  still  smaller  before  such  a  policy  could  go 
into  operation.  Should  a  president  be  elected  pledged 
to  free-coinage,  every  creditor  having  an  over-due  obli- 
gation not  payable  in  gold,  would  of  course  press  its 
liquidation.  During  the  months  that  would  intervene 
between  the  election  and  the  installation  of  such  a 
party  in  power,  every  such  debt  would  be  brought  to 
suit  and  the  debtor  compelled  to  do  one  of  three  things  : 
to  wit;  pay  his  debt,  suffer  execution  or  foreclosure,  or 


THE   RESULTS   OF   FREE-COINAGE  OF  SILVER. 

furnish  a  new  obligation  payable  in  gold.  It  is,  therefore, 
only  the  debtor  whose  obligation  might  not  then  be  due 
who  could  possibly  reap  advantage  from  the  wholesale 
depreciation  of  the  established  equivalency.  The  man 
who  would  seek  to  lighten  his  own  burden  at  the  risk  of 
increasing  to  such  an  extent  as  seems  in  this  case  inevitable 
that  which  others  bear,  certainly  deserves  little  considera- 
tion. If  any  one  has  a  right  to  speak  as  a  representative 
of  the  debtor  class  it  is  the  writer  of  this  volume.  De- 
pendent upon  his  own  exertions  for  daily  bread  ;  engaged 
in  an  occupation  in  which  both  opportunity  and  compen- 
sation are  the  most  precarious  ;  working  habitually  more 
hours  a  day  than  any  manual  laborer  ;  taking  no  respite, 
enjoying  no  holiday  ;  suffering  from  infirmity  that  leaves 
few  hours  free  from  pain,  and  bearing  a  burden  of  obli- 
gation he  would  gladly  give  his  life  to  discharge,  he 
surely  does  not  represent  any  thought,  purpose,  or  incli- 
nation inimical  to  the  poorest  laborer  or  prejudicial  to 
the  interest  of  the  most  sorely  beset  debtor  in  all  the 
land.  The  fact  that  a  man  is  in  debt,  however,  does  not 
release  him  from  obligation  to  regard  the  general  wel- 
fare, not  his  own  petty  opportunity,  as  the  rule  of  his 
political  action.  There  can  be  in  a  republic,  no  more 
dangerous  tendency  than  that  which  invites  men  to  base 
their  public  action  upon  a  hope  of  relief  from  their  own 
misfortune  through  disregard  of  the  rights  of  others. 

8.  The  owners  of  silver  bullion  at  the  time  such 
a  policy  should  go  into  effect  would  be  the  class  who 
would  derive  the  chief  advantage  therefrom.  There  is 


110      THE   RESULTS   OF   FREE-COINAGE   OF  SILVER. 

no  doubt  that  its  value  would  be  somewhat  enhanced, 
even  when  measured  by  gold,  through  its  unrestricted 
coinage  and  instant  certification,  since  the  reduction  of 
the  supply  thereby  produced  would  naturally  advance 
its  price.  To  what  extent  it  would  be  increased  it  is 
impossible  to  state.  Considering  the  amount  on  hand 
already  coined,  nearly  $400,000,000,  the  amount  of  bull- 
ion in  the  government's  possession  awaiting  coinage  and 
the  immense  surplus  of  silver  in  other  countries,  it  does 
not  seem  probable  that  the  roseate  hopes,  even  of  the 
present  holders  of  silver,  would  be  very  largely  realized. 

As  to  the  future  production  of  silver,  there  is  little  rea- 
son to  expect  that  its  market  value  would  be  greatly  en- 
hanced. The  dream  that  the  world  can  be  compelled  to 
undertake  again  the  problem  of  free-coinage  of  two  met- 
als at  a  fixed  ratio  of  equivalency  is  evidently  futile. 
A  largely  increased  restricted  coinage  of  silver  is  prob- 
ably attainable  by  international  agreement  ;  but  the 
effect  of  the  adoption  of  a  silver  standard  by  the  United 
States  would  tend  still  further  to  restrict  its  use  by  Euro- 
pean nations,  since  as  soon  as  our  present  gold-indebted- 
ness was  wiped  out,  it  would  diminish  the  demand  for 
gold  as  a  basis  of  credit-currency  abroad,  and  leave  our 
stock  of  that  metal  free  to  swell  the  reserves  of  European 
monetary  systems,  thereby  strengthening  instead  of  weak- 
ening the  gold  monometallism  of  Europe. 

That  we  would  reap  compensating  advantages  by  se- 
curing the  trade  of  the  Orient  through  the  adoption  of 
a  silver  standard  of  equivalency  seems  at  least  doubtful, 


THE  RESULTS  OF  FREE-COINAGE  OF  SILVER.      Ill 

in  view  of  the  ract  that  England,  the  only  nation,  until 
recent  years,  to  adopt  the  gold  standard,  has  outstripped 
all  others  in  securing  the  trade  of  the  East.  The  fact 
should  also  be  remembered  that  our  Chinese  Exclusion 
Acts  cut  us  off  from  any  sympathetic  co-operation  with 
the  greatest  silver  nation  of  the  world.  On  the  whole,  it 
may  safely  be  said  that  the  business  of  silver  production 
is  likely  to  be  the  only  industry  to  receive  advantage, 
should  the  policy  of  free-coinage  of  silver  ever  prevail 
in  this  country  and  even  this,  to  a  much  less  extent  than 
is  claimed  by  its  advocates. 

9.  Another  matter  that  should  not  be  lost  sight  of  is 
the  almost  irretrievable  character  of  the  change  to  a  sil- 
ver standard  of  equivalency,  if  it  should  happen  that  the 
hopes  of  the  advocates  of  free-coinage  should  prove 
delusive.  While  the  change  from  a  double-standard  to  a 
single  one  based  on  the  most  valuable  coin-metal,  if  made 
with  care  and  prudence,  does  not  produce  any  serious 
results,  can  the  same  be  said  of  a  change  from  silver- 
monometallism  to  the  gold-standard  ?  The  instances  of 
such  change  are  not  many,  and  none  of  them,  it  is  be- 
lieved, have  been  made  by  peoples  approaching  ours  in 
recuperative  energy.  There  is  every  reason  to  believe 
that  such  an  experiment  would  almost  wholly  destroy  our 
magnificent  national  credit  and  leave  us  to  struggle  back 
to  a  gold  basis  under  an  enormous  load  of  debt  which 
we  should  be  compelled  to  refund  at  a  rate  of  interest 
unknown  to  us  as  a  nation  since  the  most  critical  period 
of  the  war  for  the  union. 


112      THE  RESULTS  OF  FREE-COINAGE  OF  SILVER. 

10.  There  is  one  other  view  of  the  probable  effect  of 
free-coinage  of  silver  at  this  time,  which,  it  seems  to 
me,  has  hitherto  been  given  too  little  attention.  It  is 
beyond  question  that  the  election  of  a  president  favor- 
able to  such  policy  and  having  it  in  his  power  by  a  sim- 
ple executive  act  to  put  it  in  operation  even  in  defiance 
of  a  majority  of  both  houses  of  Congress,  would  under 
present  financial  conditions,  create  a  panic  unprece- 
dented even  by  that  which  followed  the  election  of 
1892.  Such  panic,  like  its  great  predecessor,  would  be 
precipitated  not  so  much  by  actual  conditions  as  by  that 
apprehension  which,  in  the  business  world,  always  dis- 
counts anticipated  disaster.  To  say  that  it  would  cause 
the  utter  failure  and  hopeless  insolvency  of  a  larger 
number  of  business  establishments  than  did  the  "  crash  " 
of  1892-3,  is  but  to  echo  the  conviction  of  every  thought- 
ful man.  That  such  failures  would  be  attended  with  a 
still  further  restriction  of  the  area  of  profitable  employ- 
ment every  one  knows.  Suppose  that,  after  the  election  in 
November,  the  present  business  depression  should  be 
aggravated  by  such  a  panic  as  must  inevitably  follow 
the  triumph  of  free-silver — what  would  be  the  conse- 
quences ?  Suppose  it  should  add  fifty  or  twenty,  or  even 
ten  per  cent,  to  the  number  of  the  unemployed,  and  take 
away,  as  it  surely  would,  the  hope  of  better  times  by 
which  so  many  have  so  long  been  buoyed  up  ?  Who 
shall  say  what  scenes  we  might  not  witness  in  our 
great  cities.  Want  and  despair  are  terrible  incentives  to 
violence  and  insurrection,  to  riot  and  bloodshed.  Prom- 


THE  RESULTS  OF  FREE-COINAGE  OF  SILVER.       113 

ises  are  of  no  avail  to  a  populace  without  work,  without 
food,  and  without  reasonable  hope  of  better  conditions. 
From  such  study  of  our  recent  long-continued  depression 
as  the  writer  has  been  able  to  make,  he  is  fully  satisfied 
that  a  period  of  great  financial  stringency  following  the 
coming  election  would  be  attended  with  such  scenes  of 
riot  and  destruction  as  have  never  been  witnessed  in  this 
country.  He  has  no  desire  to  enact  the  role  of  alarm- 
ist and  does  not  believe  the  American  people  will  so  far 
lose  the  capacity  for  self-government  of  which  we  have  so 
long  boasted,  as  to  make  such  a  condition  possible  ;  but 
safety  always  lies  in  the  clear  apprehension  of  probable 
consequences.  Thanks  to  the  wonderful  increase  of  pro- 
ductive capacity,  no  man  in  all  the  world  suffers  hunger 
now  save  those  who  from  lack  of  wages  may  be  unable 
to  buy  the  necessaries  of  life.  But  this  hunger  once 
aroused  and  made  a  general  condition  is  the  most  terrible 
monster  that  can  threaten  the  peace  of  civilized  society. 
In  all  these  respects  the  free-coinage  of  silver  stands 
in  marked  contrast  as  a  proposed  remedy  for  existing 
monetary  evils,  to  the  safe,  simple,  and  effective  method 
for  securing  an  abundant  and  stable  currency  which  this 
volume  is  intended  to  suggest. 

ii.  One  more  subject  remains  to  be  considered 
There  is  no  doubt  a  very  considerable  element  of  our 
population,  not  inferior  to  any  other  element  in  general 
intelligence,  moral  worth,  and  patriotic  purpose,  who  look 
with  serious  apprehension  upon  the  tendency  of  wealth 


114       THE   RESULTS   OF   FREE-COINAGE   OF   SILVER. 

to  concentrate  in  few  hands,  to  the  establishment  of 
class-distinctions  based  on  wealth  alone,  and  the  increase 
of  dependency  that  results  from  the  centralization  of 
business  in  a  constantly  decreasing  number  of  great  es- 
tablishments rather  than  in  an  increasing  number  of 
small  ones.  That  such  a  tendency  is  to  be  deplored  no 
man  can  question.  The  concentration  of  power,  whether 
physical,  political,  or  financial,  in  few  hands  is  always 
dangerous.  That  means  will  be  found  to  counteract  this 
tendency  in  the  future  there  is  no  doubt.  At  present, 
knowledge  of  the  extent  and  causes  of  such  tendency  is 
lacking.  Imagination  and  vague  hypothesis  have  been 
too  frequent  elements  of  speculation  upon  the  subject. 
With  fuller  knowledge  is  sure  to  come  a  better  compre- 
hension of  the  remedies  required. 

That  a  very  considerable  proportion  of  those  whose 
apprehension  of  malign  conditions  as  the  result  of  this  ten- 
dency is  most  intense,  are  inclined  to  venture  the  experi- 
ment of  free-coinage  of  silver  as  a  remedy  therefor,  every 
one  who  has  given  any  attention  to  the  subject  very  well 
knows.  The  writer  does  not  need  to  state  here  that  he 
has  a  most  ardent  sympathy  with  those  who  entertain  the 
most  serious  apprehension  for  the  results  of  this  growing 
tendency.  Grave  as  is  his  apprehension  of  evil  conse- 
quences to  result  from  the  adoption  of  the  silver  standard 
of  equivalency,  he  might  even  feel  constrained  to  give  it 
his  support  as  an  alternative  evil,  were  there  reasonable 
ground  to  believe  that  it  would  prove  a  remedy  for  this 
tendency.  He  has  given  many  years  to  the  study 


THE  RESULTS  OF  FREE-COINAGE  OF  SILVER.       11$ 

of  these  questions,  and  while  rarely  able  to  approve 
the  drastic  remedies  proposed  by  reformers  who  are 
not  willing  to  see  evils  cured  by  the  same  slow  process 
of  growth  by  which  they  are  evolved,  he  has  no  less 
doubt  of  the  need  of  cure  and  perhaps  much  greater 
hope  of  the  ultimate  betterment  of  harsh  conditions. 

In  the  present  case,  his  opposition  to  the  free-coinage 
of  silver  is  based  not  only  upon  the  views  heretofore  set 
forth,  but  on  an  abiding  conviction  that  it  would  directly 
and  powerfully  tend  to  increase  the  proportional  area  of 
dependency  and  enhance  the  tendency  toward  the  con- 
centration of  values  in  few  hands — in  other  words,  to 
make  the  rich  relatively  richer,  and  to  increase  the 
number  of  the  poor  even  if  it  did  not  accentuate  the 
conditions  of  the  poorest. 

Without  discussing  the  matter  at  any  length  he  desires 
to  state  a  few  propositions  on  which  his  conviction  rests, 
that  the  effect  of  free-coinage  would  be  exactly  the  con- 
verse of  what  the  class  referred  to  hope  and  desire  it 
might  be.  These  propositions  are  : 

Any  depreciation  of  general  values  must  fall  most 
heavily  upon  that  class  who  stand  just  above  those  who 
are  dependent  solely  upon  to-day's  labor  for  to-morrow's 
bread.  This  class  is  composed  in  the  first  place  of  self- 
employers,  mechanics,  tradesmen,  and  the  like,  who 
have  by  thrift  and  industry  acquired  a  little  surplus  and 
have  invested  the  same  in  business  which  requires  their 
own  labor  and  that  of  a  few  others.  The  destruction  of 
such  a  business  not  only  throws  these  wage-earners  out 


Il6       THE   RESULTS   OF   FREE-COINAGE   OF   SILVER. 

of  employment,  but  precipitates  the  employer  and  his 
family  into  the  class  of  absolutely  dependent  laborers, 
thereby  increasing  its  numbers  and  decreasing  the  op- 
portunities of  those  already  in  its  ranks. 

Financial  convulsions  have  been  among  the  chief 
causes  of  the  concentration  of  wealth  in  few  hands. 
The  strong  survive  :  the  weak  are  crushed.  When  the 
storm  is  over  there  are  fewer  rich  men  and  more 
poor  men  than  when  it  begun.  Also,  the  rich  are  rela- 
tively richer  than  they  were  ;  and  the  poor  relatively 
poorer,  not  only  in  purse  but  in  opportunity.  The  fail- 
ure of  a  great  merchant  or  manufacturer  may  for  a  time 
lower  the  price  of  goods  by  throwing  his  stock  upon  the 
market,  but  it  will  cause  the  failure  of  a  dozen,  perhaps 
a  hundred,  others  whose  wealth  will  be  absorbed  by  other 
rich  men,  while  those  who  fail  and  their  families  are 
added  to  the  ranks  of  dependency. 

Suppose  the  greatest  estate  in  the  country  should  to- 
morrow become  insolvent,  by  whom  would  its  $200,000,- 
ooo  of  values  be  absorbed  ?  By  other  men  already 
worth  millions.  Its  insolvency  would  drag  down  many 
others  whose  possessions  would  also  go  into  the  hands 
of  great  capitalists.  There  would  be  a  hundred  or  a 
thousand  more  poor  men  as  a  result,  while  the  number 
of  the  very  rich  would  be  reduced  to  a  like  extent  ; 
but  the  rich  men  who  were  left  would  own  all  that  the 
greater  number  had  owned  before. 

A  few  great  farmers  may  be  compelled  by  financial 
stringency  to  sell  their  lands  ;  but  ten  times  as  many 


THE   RESULTS   OF  FREE-COINAGE   OF  SILVER.       II? 

small  ones  will  lose  theirs  and  become  homeless  renters 
or  dependent  laborers.  Because  of  these  things,  stability 
of  values  and  general  prosperity  are  essential  conditions 
of  all  successful  effort  toward  the  cure  of  this  tendency. 
That  free-silver  would  cause  a  financial  panic  no  man 
can  doubt,  and  if  so  its  effects  on  the  comparative  dis- 
tribution of  wealth  would  be  harmful  just  in  proportion 
to  the  extent  and  duration  of  such  monetary  crisis. 
For  this  reason,  if  for  no  other,  the  writer  would  be  com- 
pelled to  oppose  this  policy,  and  for  this  reason  he  feels 
compelled  to  invite  attention  to  the  fact  that  the  plan 
for  the  improvement  of  the  currency,  outlined  herein, 
could  not  possibly  result  in  any  disturbance  of  values  nor 
benefit  one  class  of  society  at  the  cost  of  any  other  class 
—would  cast  no  man  down  and  lift  no  man  up,  but  open 
the  gate  of  opportunity  for  all. 


XIV. 

CURRENCY   AND   PROTECTION. 

THIS  volume  was  written  for  suggestion,  not  contro- 
versy. The  author  was  impressed  with  the  belief  that 
the  apparent  issues  of  the  pending  political  contest  were 
obscuring  the  real  questions  to  be  decided,  thereby  nar- 
rowing the  range  of  discussion  to  a  controversy  solely 
as  to  the  abstract  merits  of  two  theories  of  coinage,  to 
the  neglect  of  our  financial  condition  and  the  use  of  our 
national  credit  to  supply  a  currency  well  calculated  to 
meet  the  desires  of  all  except  those  who  may  have  a  per- 
sonal interest  either  in  the  free-coinage  of  silver  or  the 
substitution  for  our  present  credit-money  of  a  currency 
consisting  of  bank-issues  based  on  national  bonds. 

Of  course,  the  silver  mine  owner  and  those  otherwise 
engaged  in  the  production  of  this  metal  have  a  personal 
interest  in  the  adoption  of  a  policy  of  unrestricted  coinage, 
which  very  naturally  tends  to  bias  their  view  of  the  pub- 
lic interest.  This  fact  involves  no  derogation  of  the 
character  or  worth  of  such  citizens — it  is  merely  a 
statement  of  the  universal  law  of  human  nature : 

"  When  self  the  wavering  balance  holds 
'Tis  rarely  right  adjusted." 
Ill 


CURRENCY   AND   PROTECTION.  1 19 

The  same  condition  is  found  on  the  other  side  of  the 
question.  The  capitalist  who  desires  a  good  investment ; 
the  broker  whose  harvest-time  comes  when  there  is  a 
need  for  a  particular  kind  of  currency,  and  the  banker 
who  under  such  a  system  would  enjoy  the  benefit  of  an 
immense  loan  of  public  credit — all  these  are  equally 
interested  in  the  profits  to  be  derived  from  the  only  sys- 
tem hitherto  suggested  instead  of  free-silver.  The  judg- 
ment of  one  of  these  classes  is  just  as  likely  to  be  biassed 
as  that  of  the  other,  and  neither  of  them  can  be  accepted 
as  wholly  free  from  suspicion. 

The  author's  purpose,  in  the  plan  set  forth,  has  been 
to  suggest  a  form  of  currency  which  should  meet  both 
extremes  of  popular  thought  and  give  : 

1.  A  currency  as  abundant  as  may  be  desired,  and 

2.  A  currency  of  unquestionable  stability  which  shall 
at  all  times  be  as  good  as  gold. 

He  has  endeavored  to  unite  with  these  qualities  the 
following  desirable  conditions,  to  wit  : 

1.  A  great  reduction  of  the  interest-charge  in  com- 
parison with  an  equivalent  amount  of  bond-indebtedness 
requisite  as  a  basis  for  a  like  amount  of  bank-currency. 

2.  The  avoidance  of  special  favor  to  any  class  or  in- 
stitution so  that  the  advantage  resulting  from  the  issue 
of  currency  would  accrue  equally  to  all  holders  of  the 
same. 

The  bank  of  issue,  however  valuable  it  may  have  been 
in  the  past,  is  a  fact  not  in  full  accord  with  modern  ten 
dencies.     Dependent  upon  legislation  as  its  issues  must 


120  CURRENCY  AND    PROTECTION. 

always  be  for  desirability  and  stability,  it  bears  always 
the  complexion  of  monopoly  and  favor  to  a  specific 
class.  Especially  is  this  true  since  modern  history  has 
developed  the  fact  that  such  issues  can  only  be  made 
stable  by  having  the  legal-tender  quality  attached  to 
them  and  their  credit  enhanced  by  the  guaranty  of  gov- 
ernment. It  may  well  be  doubted  whether  a  great 
central  bank  like  those  of  the  leading  nations  of  Europe, 
or  even  one  formed  on  the  plan  of  our  present  national 
banks,  is  in  harmony  with  our  institutions.  The  over- 
throw of  the  old  Bank  of  the  United  States  was  in  its 
day  a  great  financial  calamity,  but  there  are  few  who  do 
not  now  believe  that  it  was  a  national  blessing.  The  power 
of  segregated  capital  is  serious  enough  without  the  aid 
of  governmental  favor  or  the  control  of  the  credit- 
currency  of  the  country. 

Much  has  been  said  in  opposition  to  the  idea  of  the 
government  being  engaged  in  banking.  There  is  much 
ground  for  this  objection  so  long  as  the  currency  it  issues 
is  maintained  on  the  theory  of  "  constant  redeemability  " 
which  compels  it  not  only  to  issue  currency  but  to 
engage  in  brokerage,  and  that,  too,  upon  essentially 
unequal  and  unfavorable  terms.  The  business  of  bank- 
ing is  for  the  profit  of  the  banker.  He  does  not  engage 
to  issue  currency  except  for  profit,  and  no  man  has  any 
right  to  demand  that  any  particular  policy  be  adopted 
for  his  especial  advantage.  Currency  is  the  business  of 
government,  and  the  advantage  resulting  from  the  issue 
of  credit-money,  whatever  its  form,  should  accrue  not 
to  bankers  as  a  class,  but  to  all  the  people. 


CURRENCY  AND  PROTECTION.       121 

As  has  been  shown,  the  credit  of  the  country  may  be 
easily,  safely,  and  most  profitably  used  as  currency  by 
uniting  the  desirability  of  the  bond  with  the  denomina- 
tional character  of  our  existing  demand-obligations.  It 
is  possible  that  even  a  lower  rate  of  interest  than  that 
suggested  might  ultimately  be  adopted.  Even  at  that 
rate,  however,  it  is  a  much  cheaper  currency  than  can 
be  obtained  by  any  other  means  by  which  assured  stabil- 
ity can  be  secured — less  than  one-fourth  the  cost  of  our 
present  bank-notes  and  unquestionably  cheaper  than  the 
legal-tender  notes  of  the  Bank  of  England,  the  price  of 
whose  shares  is  the  measure  of  it  profits,  a  large  portion 
of  which  depend  on  its  use  of  the  public  credit  and  con- 
trol of  the  public  funds. 

Whether  the  particular  plan  suggested  in  this  work 
shall  be  adopted  or  not  is  a  matter  of  no  moment.  The 
writer's  purpose  is  to  direct  attention  to  the  fact  that 
abundance  and  stability  of  the  currency  may  be  attained 
and  an  immense  economy  in  the  administration  and 
liquidation  of  the  public  debt  secured  by  abandoning  the 
theory  of  "  constant  redeemability  "  and  substituting  peri- 
odicity of  payment  of  interest  and  a  fixed  and  gradual 
liquidation.  What  shall  take  its  place  after  the  volume 
of  the  public  debt  has  been  reduced  below  the  limit  re- 
quired for  currency  circulation  may  well  be  left  to  time 
to  determine. 

One  thing  should  by  no  means  be  neglected  :  the  whole 
or  some  fixed  part  of  the  duties  on  imports  should  be  paid 
in  gold.  When  a  government  engages  to  pay  the  principal 
and  interest  of  its  debt  in  gold,  it  should  make  such  leg- 


122  CURRENCY  AND  PROTECTION. 

islative  provisions  as  will  show  to  every  creditor  its  pur- 
pose and  ability  to  redeem  such  pledge.  Unless  it  has 
the  evident  power  to  demand  gold  payments  on  at  least 
a  portion  of  its  revenue  charges,  no  man  can  ever  be 
sure  that  it  will  have  gold  in  its  treasury  to  meet  such 
obligations  whether  they  be  great  or  small. 

Another  motive  which  influenced  the  writer  in  the 
preparation  of  this  work  was  an  earnest  desire  to  invite 
the  attention  of  the  Republican  party  to  the  intimate 
and  vital  relation  that  exists  between  the  currency  ques- 
tion and  the  economic  policy  of  protection.  A  most 
earnest  believer  in  the  economic  doctrine  of  protection, 
especially  as  applied  to  our  present  industrial  conditions, 
particularly  when  co-ordinated  with  the  related  principles 
reciprocity  and  preferential  duties  on  importations  made 
in  American  bottoms,  there  seemed  to  him  a  tendency 
to  regard  protection  as  the  sole  function  of  government 
and  the  only  thing  necessary  to  insure  the  immediate 
restoration  of  old-time  conditions  of  prosperity — high 
prices,  uniform  profits,  and  phenomenal  opportunity. 
The  truth  is,  that  over-production  and  the  surplus  of 
labor  resulting  from  the  industrial  development  of  the 
past  have  brought  a  new  epoch,  one  in  which  the  eco- 
nomics of  production  are  bound  to  constitute  a  more 
important  feature  of  our  industrial  conditions  than  ever 
before. 

Because  of  this  fact  the  question  of  an  abundant  and 
stable  currency  united  with  a  marked  diminution  of  the 
cost  of  our  public  debt,  now  approaching  again  the  sum 


CURRENCY  AND   PROTECTION.  123 

of  tivo  billion  dollars,  becomes  a  matter  of  vital  importance 
to  the  success  of  protection  in  securing  the  results  antici- 
pated from  its  re-application  to  our  industrial  conditions. 
When  some  months  ago  the  writer  ventured  the  predic- 
tion that  the  currency  question  would  prove  "  the  hot 
end  of  the  poker  in  the  coming  campaign,"  the  idea 
was  greeted  with  open  ridicule  by  many  of  his  party  as- 
sociates for  whose  opinions  he  has  always  entertained 
the  very  highest  respect.  That  the  result  has  fully 
justified  his  expectation  is  a  matter  of  little  gratification, 
since  it  has  found  the  Republican  party  wholly  unpre- 
pared with  a  distincive  policy  beyond  the  mere  negative 
declaration  against  free-silver  and  the  peril  of  a  change 
of  the  standard  of  equivalency  at  this  time.  To  the 
question  how  the  existing  evils  of  our  monetary  system 
are  to  be  remedied  it  makes  no  answer  nor  any  authori- 
tative suggestion. 

Yet  it  must  be  apparent  to  all  that,  under  existing  con- 
ditions, protection  without  a  stable  and  abundant  cur- 
rency and  the  adoption  of  effective  means  for  the 
protection  of  the  public  credit  is  simply  an  eagle  with- 
out wings.  Its  efficacy  as  an  economic  system  depends 
wholly  on  such  restoration  of  confidence  as  will  incline 
capital  to  engage  in,  to  support  and  back  productive  en- 
terprise. This  confidence  is  in  a  superlative  degree  de- 
pendent on  a  currency  which  not  only  commands  popular 
approval  but  which  itself  does  not  offer  an  inviting  field 
for  speculative  investment,  and  thereby  tend  to  with- 
draw capital  from  productive  investment.  This  is  a 


124  CURRENCY  AND   PROTECTION. 

great  detect  of  all  banking-currency.*  Under  our  pres- 
ent system  every  dollar  of  bank-currency  requires  the 
investment  of  a  like  amount  in  bonds,  so  that  there  can 
be  no  real  enhancement  of  the  circulation  but  only  a 
change  of  form.  Indeed,  there  is  some  restriction,  since 
every  bank  is  required  not  only  to  keep  bonds  on  de- 
posit but  to  maintain  a  specific  reserve  for  the  redemp- 
tion of  *  its  own  notes.  This  becomes  important  as 
affecting  not  the  essential  character  of  protection  as  a 
national  policy  but  its  probable  efficacy  at  this  time. 

Protection  has  practically  come  to  be  an  admitted 
necessity.  While  the  majority  of  those  who  are  theo- 
retical believers  in  what  is  termed  free-trade  as  an 
universal  economic  principle,  have  not,  of  course,  sur- 
rendered that  belief,  a  continually  increasing  deficit,  due 
in  part  to  lack  of  revenue  and  in  part  to  drain  upon 
the  treasury  caused  by  the  conditions  of  the  currency, 
have  satisfied  every  candid  and  patriotic  mind  that  some- 
thing must  be  done  to  increase  the  revenues  ;  and,  under 
existing  conditions,  even  the  free-trader  is  bound  to  ad- 
mit that  there  is  no  other  course  to  pursue  but  to  try 
again  the  policy  of  protection.  For  these  reasons,  pro- 
tection has  practically  dropped  out  of  trie  campaign 
as  a  contested  principle,  and  the  American  people  are 
turning  their  attention  to  the  currency  problem  with  a 
universality  of  interest  never  before  manifested  in  any 
political  issue  since  that  involved  in  the  struggle  for  the 
preservation  of  national  unity  was  decided.  This  vol- 
ume is  in  part  intended,  therefore,  to  supply  an  apparent 


CURRENCY   AND   PROTECTION.  12$ 

defect,  in  the  Republican  position  and  show  that  the  evils 
of  our  present  monetary  and  financial  conditions  may 
be  easily,  cheaply,  and  certainly  cured  without  modifi- 
cation of  the  existing  standard  of  equivalency,  whether 
by  adopting  the  plan  outlined  herein  or  one  which  may 
commend  itself  to  the  general  approval  as  better — to 
show,  indeed,  that  it  is  unnecessary  to  appeal  to  the 
dangerous  expedient  of  unrestricted  coinage  of  silver  to 
secure  the  monetary  conditions  desired  by  all,  abundance 
and  stability  of  the  currency  and  absolute  uniformity  of 
value  between  all  its  parts. 


XV. 

THE  RICH  AND  THE  POOR. 

THE  author  was  especially  impelled  to  put  forth  this 
volume  by  a  very  serious  apprehension  in  regard  to  the 
consequences  to  flow  from  an  apparently  increasing 
antagonism  between  two  classes,  or  rather  two  conditions 
of  American  life.  By  this  is  meant  that  moral  and  in- 
tellectual condition  of  contrasted  elements  of  our  people 
which  is  popularly  known  as  the  "  war  between  labor 
and  capital,"  the  "conflict  between  the  rich  and  the 
poor,"  "  between  the  debtor  and  the  creditor  classes." 
These  phrases,  quoted  from  the  very  highest  authority, 
are  used  to  designate  a  spirit  or  tendency  not  easily 
definable,  yet  in  a  general  way  universally  understood. 
To  the  author's  mind  they  represent  a  most  dangerous 
and  deplorable  tendency.  While  it  is  possible  that 
under  certain  circumstances,  like  those  which  preceded 
that  terrible  social  and  political  convulsion  which  we 
term  the  "  French  Revolution,"  conflict  between  two 
phases  of  society  seems  unavoidable,  he  does  not 
believe  that  any  such  condition  exists  or  is  likely  to 
arise  between  economic  classes  of  American  society. 
The  rich  man  of  to-day  is  the  result  of  antecedent  condi- 

126 


THE  RICH  AND  THE  POOR.  127 

tions  for  which  he  is  no  more  responsible  than  his  neigh- 
bor of  moderate  means,  and  the  debtor  is  such  by  his 
own  volition  and  can  by  no  means  blame  his  creditor  for 
the  failure  of  his  own  expectations.  The  restoration  of 
prosperity  must  depend  upon  harmonious  co-operation 
between  these  classes  rather  than  in  a  conflict  which  un- 
settles values,  paralyzes  production,  destroys  the  confi- 
dence in  assured  profit  for  the  one,  and  closes  the  door 
of  opportunity  to  the  other. 

There  are,  of  course,  exceptions  to  every  general 
rule  and  especially  to  vague  classifications  of  society, 
but  as  a  rule  it  may  safely  and  justly  be  said  that 
nothing  can  compare  with  the  elastic  hopefulness  of 
the  American  debtor  unless  it  be  the  patient  for- 
bearance and  cheerful  helpfulness  of  the  American 
creditor.  Together  they  make  the  strongest  and  most 
harmonious  economic  combination  of  co-ordinate  finan- 
cial forces  which  the  world  has  ever  known.  The 
marvellous  industrial  and  financial  progress  of  the 
Republic  during  the  past  thirty  years,  has  been  due  in 
the  main,  to  their  harmonious  co-operation.  In  no 
other  country  has  capital  been  so  favorable  to  enter- 
prise ;  in  no  other  country  has  enterprise  so  lavishly 
rewarded  capital.  The  improvement  of  economic  con- 
ditions in  the  future  will  not  lie  along  the  line  of  con- 
flict between  these  forces,  but  along  that  of  substantial 
agreement.  The  true  interest  of  capital  lies  in  the  road 
to  general  prosperity,  to  general  employment,  to  general 
comfort  and  general  success. 


128  THE  RICH  AND  THE  POOR. 

For  a  time,  tendencies  may  favor  concentration  of 
wealth  and  restriction  of  opportunity ;  but  such  tendencies 
must  steadily  relax  before  competition  and  the  irrepres- 
sible aspiration  of  the  American  people.  In  this  country 
the  time  is  sure  to  come,  as  it  has  already  come  in  Switzer- 
land, when  the  more  wealthy  element  of  a  population, 
strangely  imbued  with  an  almost  universal  desire  for  the 
betterment  of  general  conditions,  shall  vie  with,  even  if 
it  does  not  excel,  the  laboring  class  and  those  of  re- 
stricted means  in  the  desire  to  ameliorate  our  general 
industrial  and  financial  conditions. 

There  are,  no  doubt,  very  many  of  this  class  who  are 
not  now  animated  by  such  purpose.  This  is  but  natural. 

The   struggle   for   predominance   whether   financial   or 

> 

political  always  diverts  attention  and  sympathy  from  pop- 
ular needs  and  existing  tendencies.  The  politician  whose 
attention  has  been  long  absorbed  by  the  strife  of  parties, 
and  the  millionaire  whose  utmost  powers  have  been  en- 
gaged in  the  strife  for  wealth,  are  both  unfitted  to  make 
a  fair  estimate  of  the  general  need,  the  general  aspira- 
tion, the  aggregated  tendency  of  any  particular  time.  So, 
too,  is  the  man  whose  energies  have  for  a  lifetime  been 
absorbed  by  the  strife  for  daily  bread.  His  views  are 
narrowed  to  his  own  wants,  his  own  comforts,  his  own 
immediate  advantage.  Improved  conditions  will  never 
result  from  heated  strife  between  these  elements.  It 
is  in  vain  that  the  employer  declares  that  his  interests 
are  identical  with  those  of  the  laborer,  and  equally  vain 
for  the  laborer  to  assert  that  his  employer  is  his  enemy. 


THE   RICH   AND   THE  POOR.  1 29 

To  a  certain  point  their  interests  are  identical  ;  beyond 
that  they  diverge.  The  remedy  is  not  to  be  found  in 
heated  conflict  resulting  in  still  further  divergence  of 
sentiment  and  sympathy,  but  in  the  cultivation  of  closer 
relations  and  a  fuller  comprehension  of  the  needs  of 
each  and  the  ultimate  welfare  of  all — in  mutual  co-op- 
eration rather  than  in  mutually  destructive  antagonism. 
The  war  between  rich  and  poor  must  be  waged  with 
light  and  knowledge  which  shall  show  the  common 
peril  of  existing  tendencies  and  unite  the  better  ele- 
ments of  both  great  classes  in  a  common  sentiment 
which  shall  constitute  a  public  opinion  making  the 
"  general  welfare  "  rather  than  the  specific  interests  of 
either  class  the  basis  of  political  action. 

Such  changes  are  the  result  of  growth,  not  of  instant 
revolution.  The  accumulation  of  so  great  a  proportion 
of  wealth  in  a  few  hands  has  been  the  result  of  tenden- 
cies as  old  as  civilization — of  conditions  many  of  which 
antedate  our  national  existence.  These  have  been  greatly 
modified  in  the  recent  past  and  are  destined  to  even 
greater  modification  in  the  near  future.  For  this  every 
good  citizen  should  hope  ;  this  result  all  good  men  and 
women  should  prepare  themselves  to  promote  in  any  of 
the  thousand  peaceful  and  kindly  ways  in  which  influence 
may  be  exerted  on  others  ;  for  this  condition  every  one 
should  wait,  as  a  thing  worth  waiting  for,  with  patience. 
Because  of  this,  the  man  who  seeks  to  precipitate  a  state 
of  war  between  rich  and  poor,  who  seeks  to  promote  and 
intensify  a  sentiment  of  injustice  and  oppression  which 


130  THE   RICH   AND   THE   POOR. 

economic  and  industrial  conditions  may  have  engendered, 
who  would  stir  the  debtor  to  resentment  and  thereby  move 
the  creditor  to  resulting  animosity  ;  the  man  or  the  party 
that  does  these  things,  whatever  the  motive  that  may 
be  proclaimed,  whether  sincere  or  insincere  in  purpose 
— such  a  man  or  such  a  party  is  not  only  dangerous  to 
national  prosperity,  but  a  threat  to  the  future  of  civiliza- 
tion. 

Methods  and  theories  are  of  little  importance.  The 
world  pays  little  heed  to  them  or  to  those  who  formu- 
late them.  It  never  follows  in  the  path  marked  out  for 
it  by  the  wise.  Those  who  are  able  to  declare  with  the 
utmost  positiveness  the  methods  of  the  future — they  and 
their  schemes  are  soon  forgotten.  The  wisdom  of  the 
wisest  of  to-day  who  would  put  fetters  on  to-morrow 
and  seek  to  establish  with  the  force  of  compulsory  leg- 
islation a  new  condition,  whose  beneficence  is  a  matter 
of  theory  rather  than  popular  tendency,  is  nearly  always 
folly.  But  the  aspiration  of  the  weak,  the  purpose  of 
the  many,  that  shapes  itself  slowly  but  surely  into  new 
methods,  is  the  only  secure  hope  of  improved  conditions 
and  the  highest  prosperity. 

THE    END. 


UNIVERSITY  OF  CALIFORNIA  LIBRARY 
BERKELEY 

Return  to  desk^from  which  borrowed. 
This  book  is  DUE  on  the  last  date  stamped  below. 


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26Mar'59CSl 


LI 


MAR  24  195 


LD  21-100m-9,'47(A5702sl6)476 

&3— • Natural  Taxation.     £»y    LtivM™   ^.  .~— 

paper 50 

84— Real   Bi-Metallism;    or  True   Coin   versus    False   Coin.  By 

EVERETT  P.  WHEELER.     Illustrated.  t  Paper,  4oc.  ;  cloth      .  75 

85— Congressional  Currency.     By  A.  C.  GORDON.     Cloth  .        .  i  25 

86 — Money  and  Prices.     By  J.   SCHOENHOF,  author  of  "Economy  of 

High  Wages,"  etc.     Cloth I   5O 

87— America  and  Europe.     By  WELLS,  PHELPS,  and  SCHUKZ. 

88— The    War    of   the    Standards.      By    Judge    ALBION    W. 

TOURGEE 75 

89— A  General  Freight  and  Passenger  Post.     By  JAMES  L. 

COWLES. 

nn—Municioal  Reforms.     By  THOMAS  C.  DEVLIN. 


YB  70058 


QUESTIONS   OF    THE    DAY. 


AUTHOR   INDEX   TO   THE 
QUESTIONS  OF   Ti;E   DAY "   SERIES. 


Alexander,  E.  P.,  No.  36 
Allen,  J.  H.,  No.  53 
Atkinson,  E.,  No.  40 
Bagehot,  W.,  No.  28 
Baker,  C.  W.,  No.  59 
Blair,  L.  H.,  No.  35 
Bonham,  J.  M.,  No.  61 
Bourne,  E.  G.,  No.  24 
Bowker,  R.  R.,  No.  10 
Bruce,  P.  A.,  No.  57 

Cleveland,  G,,  No.  &$>/ 

/ 
Codman,  J.,  No.  6/ 

Cowles,  J.  L.,  >T 


250581 


Dugdale,  R.  L.,  No.  14 
Eaton,  D.  B.,  No.  Si 
Ehrich,  L.  R.,  No.  70   . 
Elliott.  J.  R.,  No.  62 
Foote,  A.  R.,  No.  82 
Ford,  W.  C.,  Nos.  5,  6 
Foulke,  W.  D.,  No.  43 
Giffen,  R.,  No.  20 
Gordon,  A.  C.,  No.  85 
Hall,  B.,  No.  71 
Hitchcock,  H.,  No.  37 


Jacobi,  M.  P.,  No.  80 
Jones,  W.  H.,  No.  39 
Juglar,  "  ,  No.  75 

.  \V.f  No.  25 
S.,  Nos.  13,  70 

:.,  No.  44 

S.,  No.  50 

i.,  No.  42 

.,  No.  66 

J.,  No.  87 

[.  J.,  No.  52 
...  H.,  No.  67 
D.  S.,  No.  77 
jsevelt,  T.,  No.  49 
^choenhof,  J.,  Nos.  9,  30,  73,  86 
Schurz,  Carl,  No.  87 
Shearman,  Thos.  G.,  No.  83 
Sherman,  Hon.  P.,  No.  65 
Shriver,  E.  J.,  No.  63 
Smith,  R.  H.,  No.  26 
Stokes,  A.  P.,  No.  79 
Storey,  M.,  No.  58 
Strange,  D.,  No.  72 
Taussig,  F.  W,,  Nos.  47,  74 
"Tax-Payer,"  No.  55 
Tourge'e,  A.  W.,  No.  88 
Tyler,  L.  G.,  No.  68 
Wells,  D.  A.,  Nos.  3,  54,  64,  71,  87 
Wheeler,  E.  P.,  No.  84 
Winn,  H.,  No.  46 


G.  P.  PUTNAM'S  SONS,  PUBLISHERS, 

NEW  YORK  LONDON 

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